Preamble

[Mr. SPEAKER in the Chair]

PRIVATE BILLS [Lords]

STANDING ORDERS NOT PREVIOUSLY INQUIRED INTO COMPLIED WITH.

Mr. SPEAKER laid upon the Table, Report from one of the Examiners of Petitions for Private Bills, That in the case of the following Bill originating in the Lords, and referred on the First Reading thereof, the Standing Orders not previously inquired into which are applicable thereto have been complied with, namely—

Grand Union Canal Bill [Lords]

Bill to be read a Second time.

BUSINESS OF THE HOUSE

Ordered:
That the Proceedings of the Committee of Ways and Means be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[The Prime Minister.]

Orders of the Day — WAYS AND MEANS

Considered in Committee.

[Major MILNER in the Chair]

FINANCIAL STATEMENT

The Chancellor of the Exchequer (Sir Kingsley Wood): I think it important and timely that before I turn to the question of our domestic finance, I should first give the Committee some account as to how we stand in the larger economy of the external costs of the war. Anyone who reflects upon the many fronts all over the world upon which our Forces are engaged, and remembers also the ceaseless inflow


and outflow of supplies to and from this country, will realise that the external costs that we have to bear are of a heavy order and have considerable Budgetary implications. The burdens that we are carrying currently and the external obligations that we are building up for the future in the interests of the united war effort are not, I think, sufficiently appreciated, and it is desirable that I should give the Committee some account of this important aspect of war finance.

LEND-LEASE AND RECIPROCAL AID

The external costs of a country are met in ordinary circumstances by exporting goods and services for sale abroad. For the first two years of the war we relied largely upon this policy, but now we cannot spare the labour and the materials to produce the exports or the shipping to convey them. Recently the volume of our exports available to be sold abroad has fallen to about a quarter of what it was before the war. A new unifying method has been found in the great new system characteristic of the finance of this war known as Lend-Lease, or Reciprocal Aid. The institution of this plan by the President of the United States is one of the most striking and far-reaching acts of the war. It rests upon the principle that in a common war all shall give all they can to the common task. There is no question of reckoning mutual financial indebtedness. Where one Ally ships its own produce or gives it own services to another Ally, it makes the whole or part of this available without charge. Of the total goods and services which the United States supplies to this country and to Russia, China and the other members of the United Nations, 80 per cent. are on Lend-Lease terms. At first the larger part of what we received from them was in the form of food, but now the major proportion is in munitions of war and other supplies, which we are receiving in great quantity. I am not using idle words when I say once again that the people of this country do not and will not forget this splendid action of the people of the United States.

I spoke last year of the great gift of one billion dollars from Canada, which meant so much to us at that time. This year Canada has again come forward in the same generous spirit and is proposing to share her production of essential war supplies with us and the other United Nations on the basis of strategic needs.

She is proposing an appropriation of a billion dollars in the current year for this purpose. In addition, she is proposing to take over the whole cost of the Royal Canadian Air Force squadrons serving overseas, which will shortly be again increased in numbers, as well as to provide the pay and allowances of the Royal Canadian Air Force personnel serving in the Royal Air Force. This is a considerable financial contribution as well as a splendid addition to Canada's share in the deeds and the renown of the Air Forces of the United Nations. I take this opportunity—and I am sure the Committee will join with me—of expressing again to Canada how much we appreciate this new manifestation of their splendid co-operation in the common cause, magnificent in total and great-hearted in the manner of doing. The people of Canada are not yet very numerous, and they have not yet accumulated wealth like that of their great neighbours, but their action has been on a grand scale, the action of a nation conscious of its power and its place.

I do not think anyone still believes that this traffic of Lend-Lease is one sided as far as Britain is concerned, or that we receive all and give nothing or little; but all have not a complete conception of what we have in fact accomplished. If we look at the total volume of supplies which have reached us from North America since the beginning of the war, we have in fact paid for a substantial proportion of them. This country has actually spent some £1,500,000,000 in the United States since the outbreak of the war on supplies, munitions and the provision of capital equipment for the prosecution of the war. Now we on our side are applying the Lend-Lease principle to all munitions and military supplies and services, including shipping, which we furnish to the United States, Russia, China and certain Allied European Governments. Our commercial exports for which we ask payment have, as I say, fallen to a small fraction of the normal figure. The supplies which we are contributing in this way to the common task have increased greatly in the last year. The whole conception of the plan does not and is not intended to lend itself to close accounting. The American people have never put the dollar sign in the help that they have given us, and we are not putting the pound sign in the help we give back to them or give to others.

Let me illustrate why precise reckoning


is beside the mark. Let us first take our great and gallant Ally, Russia. On Red Army day my right hon. Friend the Minister of Production stated that from the beginning of October, 1941, to the end of December, 1942, we had despatched to Russia some 3,000 tanks, 2,500 aircraft, 70,000,000 rounds of small arms ammunition and 50,000 tons of precious stocks of rubber. In very round figures the value, if we sought for a moment to estimate it, of the munitions that we have already given to Russia is about £170,000,000. More than that, the Northern waters on the way to Russia tell the story not only of how British ships and men have taken the cargoes safely through, but of British ships sunk and British lives lost in our determination not only to give these supplies but to get them to Russia. We do not make a balance-sheet of items like these any more than we can ever compute in such terms the defence and victory of Stalingrad or the debt we and the whole world owe to Russia for its wonderful and outstanding achievement in the common cause. To other European Allies we are giving aid in the same spirit and in the same way. We are also giving aid on Lend-Lease terms to China to assist in her stout-hearted resistance against Japanese aggression. Transport difficulties at present reduce the full flow of that aid, but stocks are being steadily accumulated, and as transport improves they will go forward to play their part in the final and complete destruction of our common enemy Japan.

It is natural that the largest amount of our Reciprocal Aid goes to the Americans, and that for a quite simple reason. The growing American Forces who are in this country or who are stationed within the areas for which we are responsible receive, apart from their pay and from the necessary supplies they bring with them, everything that they ask for, which we are able to give, as Reciprocal Aid. Much of this Reciprocal Aid takes the form of services whose value neither they nor we seek to reckon. Who puts a price upon the service we gave when we took over, largely in our own ships, the American Expeditionary Force safely to North Africa? Who puts a value on the free access we have gladly given them to all our important war inventions or lessons of experience in the production and supply of war equipment? It may, however, be

said, by way of example, that we are spending about £150,000,000 in constructing aerodromes, barracks, hospitals and other buildings expressly for American use. Mr. Stettinius, the Administrator of Lend-Lease in the United States, gave Congress a remarkable inventory of the type of aid we provide to the American Forces, and Major Spiegelberg, the staff member of the Lend-Lease Administration in London, quoted a vivid figure to show how completely we had tried to provide the American Forces in this country with all they wanted.

From June to January last the total expenditure of the American Army authorities in making purchases in this country was no more than £250,000. As Major Spiegelberg said, this is a drop in the bucket compared with the cost of maintaining an army. All the rest of the articles, equipment, facilities and services required for the United States Forces and available in the United Kingdom are procured as Reciprocal Aid from the British. In the last seven months of last year from our own resources we furnished to the American Forces in the United Kingdom a quantity of supplies which would have involved 1,200,000 tons of shipping, which was more than the Americans themselves shipped to their own troops in the same period. We provided about 1,600,000 tons of construction materials and made available 700,000 dead-weight tons of shipping for American military operations. It seems a long time since the Prime Minister, in prophetic utterance, said that we and the Americans would find ourselves greatly mixed up during the war. We are all liking and benefiting from the mixture, and we shall continue it.

The Committee will appreciate that the total cost of all this reciprocal aid is a very large sum. We do not attempt to keep close accounts. It would take a whole division of accountants and clerks to keep such figures, and we cannot spare them for such a purpose. If we take the Lend-Lease aid now being furnished to the United Kingdom, apart from the additional aid to British Armies overseas, and make a rough comparison on the same scale of costs and values, the Committee should know that, large though the help from the United States is, it is no greater than the help we ourselves are affording to all our Allies without charge. Having regard


to the comparative size of our population and to the proportion of men and women we have already absorbed in the Forces and to the longer period in which we have been bearing the struggle, the scale of our reciprocal help is one of which we need not be ashamed. We should not forget that Reciprocal Aid is operating also on a considerable scale in Australia and New Zealand, as well as in India and in the Colonial Empire. This is a further source of strength to the Allied cause.

OVERSEAS LIABILITIES

But this is not the whole story. The aid that we receive from the United States and Canada solves almost completely our financial problems in North America, but in the rest of the world we have to fend for ourselves. For all the local costs of the war in North Africa, except at the Algerian end, throughout the Middle East and in India and Burma we are primarily responsible. The Forces of the Dominions and increasing numbers of United States Forces are also engaged in these areas, and they meet the specific expenses of their own contingents. There are also certain large military works for which the United States has taken financial responsibility. Apart from this, it is we who are carrying the financial burden of the general costs of the war over these large areas. Egypt and other countries of the Middle East are not being asked to make any contribution. Japanese aggression has made a new situation in India, and this has involved greater burdens to India itself, but the greater part of the additional costs of the defence of India, and in particular the cost of that defence when it is carried on outside her own frontiers, falls upon us. When, as we hope in due time, an Army moves forward from India to the aid of our stout-hearted Ally China, it will be at our expense. Moreover, India has become a major arsenal for materials of war from the Middle East, and for reasons of shipping this fact is of the utmost value to the cause of the United Nations. Here again we in Britain carry the financial liability of practically the whole of this considerable cost.

I have given this account, not for a moment in any spirit of questioning or complaint, for we judge these matters only by the progress we all make towards victory, and not by any assessment of the contributions any of us may make; but it does mean that a financial situation of

some difficulty is being created for us in the future of which we should be aware. Our exports, as I have said, cannot buy us more than a trifle towards these external costs. The rest we have to borrow from those countries who are making common cause with us and whom we are defending, and we are incurring a considerable obligation about repayment. The sterling balances thus created in favour of India, which represent, of course, sterling obligations for us, have been used by India to pay off what she has borrowed from us in the old days, but when all this has been discharged she will still have much in hand. Altogether, to meet the local costs of the war all the way from Tunisia to Burma, we are borrowing between £400,000,000 and £500,000,000 a year, and we are borrowing it from the countries concerned. No one but ourselves plays any part in shouldering this debt. There remain our net external costs for what we purchase in South America and the neutral countries and for the chartering of ships from the European Allies. This brought the total of what the White Paper calls our overseas disinvestment in 1942 to £630,000,000. I do not expect that the total during the coming year will be materially different.

The Committee will understand why, in the face of such a situation, I have so often emphasised the problem of our post-war balance of payments. The internal costs of the war in every country, even when they are covered by borrowings, have to be met in the main out of current effort and output. External obligations are altogether another matter. They will bring problems far more difficult to resolve, and we shall have to face a grave deterioration in our external wealth. But we are not dismayed, and it is not the first time that we have had to face and have successfully overcome such difficulties. Robert Hamilton, writing in 1814 in "An Enquiry concerning the National Debt," described how everything we held dear was then at stake and he expressed the determination of the nation at that hour of peril and crisis when he said:
No exertion can be too great, no pressure of increasing burthens is to be regarded, no dread of exhausting our resources entertained.
Old, but true again to-day.

Britain is proud and privileged once more to throw everything she can into the common effort until the surrender of the enemy is final and complete.

DOMESTIC FRONT

We must now turn to the domestic front. The outstanding features there are the still growing cost of the war, the sums we have to raise in taxation to meet it, and the borrowing programme necessary to provide the balance. The cost of the war has now reached the stupendous figure of £13,000,000,000, and the total of all our expenditure, including Debt charges and normal Civil Services throughout the war period, amounts to some £15,600,000,000. We have managed not only to meet the great war expenditure but to go on steadily developing our social services, which mean so much to the health and happiness of large numbers of our people. The social services, excluding payments in respect of unemployment, cost £160,000,000 in 1938. They will cost £219,000,000 in 1943, and this is apart from the considerable sums we are expending in connection with our stabilisation policy, to which I shall refer later. Two other matters should be noted. The increases which have been granted during the war, with the unanimous approval of this House, in the pay and allowances of the Fighting Services will cost some £159,000,000 in the year 1943, excluding the year's post-war credits for the Forces. We have also made payments under the War Damage Act in compensation for damaged buildings, business plant and machinery, and private chattels exceeding the total sum we have received in premiums and contributions.

Our war expenditure itself has been steadily increasing throughout the year. It is substantial evidence of our growing strength and power. When I opened my first Budget in 1940 we were spending about £5,000,000 a day on the war. At the time of my last Budget the rate was £12,500,000. It is now £15,000,000. I know the recital of these immense figures will again raise in all our minds the question whether we are doing all we can to avoid waste and extravagance, which are unpardonable offences at this hour. I have many times in this House referred to the vital need of ensuring that such vast sums are wisely spent, and I have given examples of the steps the Treasury and the Government Departments have taken, in conjunction with the Public Accounts Committee and the Select Committee on National Expenditure, both to cut out waste and to promote efficiency.

The Service Departments in particular are continuously reviewing their needs in order to adjust them to the changing circumstances of the war. So far as Government contracts are concerned, we are keeping the machinery under constant scrutiny in order to secure that our necessary supplies are obtained at the lowest possible cost. There is still much to be done, and we must continue our endeavours to ensure that the lower costs which result from greater experience on the part of contractors and increased turnover are adequately reflected in contract prices.

As regards the Civil Service, there has been a continuous scrutiny of the staffing arrangements within the Government Departments. Civil Service leave has been curtailed and hours of work lengthened to the maximum extent compatible with efficiency, for there comes a point when further action in that direction defeats its own object. Attention has also been concentrated upon the simplification of departmental procedure. During the last few months an intensive examination has been undertaken of the work of Government Departments in this country, coupled with a special review of certain centres abroad, with the object of curtailing those less essential services which, however desirable or necessary in ordinary times, can hardly be justified under present conditions, and economies in manpower are, I am glad to say, already resulting. Curtailment in itself is not sufficient; it must be supplemented by arrangements to ensure the most appropriate use of the man-power and woman-power which is set free. The Treasury and the Ministry of Labour, together with the Departments concerned and their staff associations, are co-operating to this end, and I have every hope that substantial benefit will result from these efforts.

WAR TAXATION

To meet the huge expenditure I have already referred to, we have raised in taxation during the past financial year, with the general and willing assent of our people, but not without many sacrifices and hardships, the unprecedented figure of £2,483,000,000. The amount of Income Tax collected in the year has for the first time in history exceeded £1,000,000,000. Of all our expenditure since the war began, whether at home or abroad, no less than 44 per cent. in the


aggregate has been met by current domestic revenue. The percentage has risen year by year from 36 per cent. in 1940 to 46 per cent. in 1942. That record compares, for instance, with the 29 per cent. covered by revenue in the 12 months ended 31st October, 1918, and, indeed, on any criterion or comparison, is a magnificent achievement by all sections of British taxpayers. They have readily accepted our double object in imposing such high taxation: first, the reduction of the large additional volume of purchasing power created by our war expenditure, and, secondly, the need to pay as we go for as much of the war as we can in order that the demands on the taxpayer for the service of the Debt after the war may be kept as low as possible and thus, among other things, greatly help then our plans for reconstruction and advancement.

On a famous occasion Mr. Gladstone, when Chancellor of the Exchequer, likened direct and indirect taxation to two fair sisters of equal charms, and if I understood him rightly, he thought it was proper to woo them both simultaneously and with equal ardour. Whatever may be thought of the ethics of such procedure in private life, the financial consequences are bound to have attractions for the Chancellor of the Exchequer. In the increase of our war taxation I have at any rate endeavoured, as the Committee are aware, to hold the balance between the two, that is, between the taxation which falls inescapably on incomes and estates and the taxation of which a considerable part is the result of optional expenditure. That balance has been substantially achieved. Direct taxation has, in fact, been called upon to bear a rather higher additional burden than indirect taxation. The additional yield over 1938–39 of all taxation in 1942–43, excluding Excess Profits Tax and National Defence Contribution, was £1,231,000,000, of which direct taxation produced £687,000,000 and indirect taxation £544,000,000. Of the increased war-time yield of indirect taxation, the increase from liquor, tobacco and entertainments, which may be regarded as essentially optional forms of expenditure, accounted for no less than £452,000,000, or 83 per cent.

Here I must say a few words about the operation of the deduction of Income Tax from wages. There are now some 7,000,000 wage-earners, who pay about

£200,000,000 of Income Tax for the year. To-day nearly every family in the country contains at least one Income Tax payer. Income Tax is, therefore, a matter of concern in millions of homes which had previously been subjected only to indirect taxation. Apart from those considerable national implications, the machinery and methods of collection are of much importance to the taxpayers concerned. Following our discussions last year, a number of modifications have been made, and I am glad to say they have proved to be successful and have largely contributed to a smooth working of the tax. Special efforts have been made to simplify tax forms and to give further facilities for learning about methods of assessment. Arrangements have, for instance, been extensively made for tax officials to attend periodically at factories in order that employees who desire it may receive expert advice in connection with all tax matters.

I have not overlooked the suggestions that have been made to levy the tax on the basis of current earnings. I described the difficulties last year, and explained how, after receiving the advice of the Trades Union Congress and the British Employers' Confederation, we had all agreed that no scheme had so far been produced which would be equitable and practicable. I said I would at any time be prepared to consider any new proposal which would meet the case, but no acceptable plan has as yet been forthcoming. There is, however, to be considered in connection with this whole matter the different situation that may arise on the return to peace-time conditions, when a considerable change-over in employment may be expected to take place. My advisers are now engaged in a close examination of this aspect of the matter and the consideration of a current earnings basis for the deduction of tax will not be ruled out of their deliberations. I shall, of course, continue to keep in close touch with the British Employers' Confederation and the Trades Union Congress on the whole subject of the operation of the tax.

WAR BORROWINGS

Even taxation of the great weight which we have imposed upon ourselves has left us with a very formidable borrowing programme. From the beginning of the war to the end of March we have borrowed no less than £8,667,000,000. We have been able to borrow those large sums at low


rates of interest and on gradually improving terms, and we have carried this process still further in the past financial year. This has been due to two main factors; first, the controls which have reserved the capital market primarily for war purposes, and, secondly, the variety of the sources which we have tapped for subscriptions to Government issues. Subscriptions to small savings, after allowing for repayments, accounted for 21 per cent. of our total borrowings, and those from non-Government sources to our longer term loans, for 34 per cent. Those are two important planks in our borrowing programme, and we must continue our efforts to strengthen them. The balance of our borrowings has been covered as to 10 per cent. by Treasury bills issued to the market and banks, as to 11 per cent. by Treasury deposit receipts from the banks, as to 5 per cent. by Tax Reserve Certificates, and as to 19 per cent. from extra-Budgetary State funds and various other sources, such as overseas borrowings and interest-free loans.

Shortly before the close of the financial year, the total sum raised during the War Savings Campaign by small savings, longer market issues, gifts and loans free of interest, amounted to the magnificent sum of £5,000,000,000, a land mark in the history of the war, and the total on 31st March was £5,320,000,000. I should, however, like to call special attention to the total of the subscriptions to small savings which, on 31st March, was £1,968,000,000, and which was made up of millions of small loans. Savings Certificates brought in £756,000,000, Defence Bonds £555,000,000, and the Post Office and Trustee Savings Banks £657,000,000. Very largely the same army of regular savers now own Income Tax post-war credits amounting, for the two years 1941 and 1942, to some £300,000,000. They deserve well of their country, and they will be a strong and stabilising force after the war. We must go on increasing the number of the small savers, for we shall have largely to depend upon the small man for our future savings, to which in turn we shall have to look for assistance in our capital commitments after the war. Perhaps I may add here that I shall ask the House this week to pass the usual annual Bill giving the

Treasury the borrowing powers necessary to cover our expenditure in 1943–44 on the same lines as in previous years.

STATISTICAL WHITE PAPER

I would call attention at this stage to the further special White Paper which I am issuing to-day. The extensive information which I published in the White Papers in 1941 and 1942 was warmly welcomed and approved both inside and outside Parliament. They are rightly regarded as important State documents, and they make a considerable and valuable addition to our official statistics. The very magnitude of our borrowing programme alone makes it most desirable that we should have adequate statistical information; for example, it is most important that we should know how far the sums we are borrowing are ultimately being made available out of the current national income. We are building up, amending and revising these statistics, as we find better approaches to the problems involved and are able to devise more exact methods of estimation. Certain revisions have been made, for example, in the previous estimate of the national income and of personal savings, which will be found in full in the White Paper. We have been able to expand the information given in previous issues, as, for example, on the main heads of personal expenditure on consumption, and an index of prices applicable to such consumption has also been provided. One table has been discontinued until we can obtain a better basis for our estimate.

There is an interesting series of figures which show how the large increase in personal incomes over the pre-war level has been disposed of. Table II shows that between 1938 and 1942 the gross total of such income, before payment of any taxation, increased by £2,235,000,000. Provision for direct taxation took £713,000,000 of the increase, and £757,000,000 was saved. Expenditure on consumption increased therefore by £765,000,000, of which about half was due to higher indirect taxation, mainly, of course, on liquor and tobacco.

The annual figures show a steady rise in personal savings, excluding provision for taxation accrued but not paid. Such savings are estimated to have increased from £628,000,000 in 1940 to £704,000,000 in 1941, and £891,000,000 in 1942. On the other hand, the fact appears that, of


the increase in personal incomes during 1942, a greater proportion was spent on consumption than of the increase during 1941. The increase in expenditure on consumption, excluding the corresponding increase of indirect taxation, was actually about one-third higher than the increase during 1941. If we allow for the increase in prices as set out in Table C of the White Paper, the volume of goods and services purchased, which had fallen during 1941, remained stationary in 1942. We ought not to be content with that. I think it will be generally agreed that there is still an appreciable margin of personal expenditure on non-essentials which can and should be curtailed.

There is one other general comment I should like to make in this connection. The main figures relate to the ultimate sources from which the nation has been able to place funds at the disposal of the Government for the prosecution of the war. The White Paper is not primarily concerned with the form in which the funds are, in fact, made available to the Exchequer. Besides ensuring that the sources of our borrowings are basically sound, the Government obviously want to borrow in the forms least likely to cause embarrassment in the future. Thus, the figures of personal savings cover such savings in all forms, whether invested, or left in the bank, or kept at home or in the pocket in notes—of the last of which there are far too many. While we are glad to see all these personal savings increasing, I must say that it is most desirable, from the point of view both of the saver and of the country, that as much as possible of those savings should be invested in some more or less durable form.

NATIONAL BALANCE-SHEET

This is a convenient opportunity for me to refer to suggestions which have been made by some hon. Members that, in some form or other, our annual Budget should be accompanied by a national balance-sheet or some form of capital assets account or the like. I am not unsympathetic, as I hope I have already shown, to giving the fullest information to the House in relation to financial matters. It is, however, evident, I think, that the State could not produce anything like the exact accounts of a business undertaking. We are incurring the cost of the war for

intangible reasons and not for material ends. Even in the more limited sphere of things with money values, there are serious difficulties in attempting to assess the position to-day. What post-war value, for instance, could now be placed on such capital items as land, buildings and the plant which the State has acquired? It would not bear any necessary relation to their costs. What matters is the earning capacity of each asset after the war; and who can say now what that earning capacity will be? These are the kinds of matters which render many of the suggestions made impracticable—at any rate for the time being.
Having said that, I would not rule out the idea that lies behind the whole matter. I expressed during the Debate on our post-war economic and financial problems the belief that we should be wise to develop to the greatest possible extent the service of statistical information. We ought to have not only financial statistics of the kind which we now have and which have been so greatly extended by the White Paper, but as full information as we can get on such matters as domestic production and private investments in capital assets; and an account of these, say, in the form of a further White Paper might well accompany our future annual Budgets. We should thus have another important State paper which would give us a much wider account, and a better picture of our affairs, and which we could continue to build up and improve, so as to enable the House and the country to have a clearer estimation of our capabilities and potentialities.

The Committee will appreciate that a publication of this kind could not be contemplated during the war, for we certainly could not publish, for example, figures of our current war production; but, in the interval, we will endeavour to make the best progress we can in the very great amount of preparatory work which will have to be done. I will only add two things. The first is that in order to accomplish what we purpose we shall need the co-operation of all our industries and that they should, as I believe they will, recognise that the time and labour employed and supplied by them will be well worth while; and, secondly, that when we have this further information we must not indulge in wishful thinking. Statistics are no substitutes for assets,


and accountancy will not take the place of economic activities and endeavour.

POST-WAR FINANCIAL POLICY

Since I last opened my Budget, we have had several Debates on post-war problems, including economic and financial questions. While we are concerned first and foremost with winning the war, we must also be preparing ourselves for the problems and projects which must be dealt with and accomplished when the war is over. In the last few months I have spoken at some length on such matters, and I do not intend to say much more on the subject now; but I should like to point out that it is as true of financial and economic policy as of any other, that what we do in war-time may be a very direct preparation for what we shall have to do afterwards. The sounder we keep our financial and economic front now, the better fitted shall we be to face our difficulties and to implement our many programmes for advancement then.

Let me take two important examples, one of a particular nature, one other more general. The first is the question of interest rates. During this war we have stabilised the general complex of interest rates at a level so low as would have been thought impossible by anyone who merely based himself on the experience of the last war. We have developed a new technique in these matters, and we have revolutionised public opinion as to what are fair rates for Government war borrowing. Thus, not merely shall we pass from war to peace with rates on a low level, but the country is, I am sure, also expecting that reconstruction and development after the war shall have the benefit of cheap money. It is the Government's intention to maintain its present policy of cheap money after the war for that purpose as well as in the interests of the Exchequer itself.

My second example is the general question of inflation. I have warned the House on a previous occasion that inflation will be one of the greatest dangers after the war. The purchasing power of current personal income will have behind it a potential reserve in the large volume of war savings and the Income Tax post-war credits, but for some time there will be only limited quantities of goods to be purchased. Whatever controls the Government may have to maintain over the

supply and distribution of these goods, there will still be as great a need as ever, side by side with the taxation we impose, for the restriction of personal consumption by voluntary savings. Only in this way shall we be able to find the physical resources and the funds which will be needed to carry out our many programmes of post-war capital reconstruction and development.

STABILISATION POLICY

In the forefront of the measures which we have taken during the war to remove the threat of inflation is our policy of stabilisation of prices. It has wide significance, and it involves a considerable annual charge upon the Exchequer. In my Budget speech of April, 1941, I undertook to hold the cost-of-living index number, apart from minor seasonal changes, within the range of 125 to 130 in terms of the pre-war level. That endeavour has been rewarded with a full measure of success. The cost-of-living index has been successfully stabilised. It has at no time risen higher than 30 per cent. above the pre-war level, and for most of the time it has been below that figure. So far as food is concerned, the food index last month was 20 per cent. above the level at the outbreak of war, as compared with 23 per cent. in April, 1941. It is sometimes suggested that while the items falling within the cost-of-living index have been stabilised in price, this has not prevented many other prices from soaring. The new material provided in Section C of the White Paper shows that, taking the general price level as a whole, this is not correct. Apart from price increases deliberately brought about by higher indirect taxes, the whole volume of consumption goods and services, including luxury goods and other non-necessaries, has not risen in price by more than 36 per cent. It is not undesirable that the less necessary goods should show a greater price increase than necessaries. The rise of 36 per cent. over the whole field apart from taxes is, I think, in a proper relationship to the rise of 30 per cent. or thereabouts in the cost-of-living index, on which the effect of war taxes has been slight.

The success of our stabilisation policy has been achieved by a firm control of prices, coupled with some application of subsidies and remission of taxation when control has been secured. It has been a


cardinal point of policy that subsidies and tax remission should not be granted until an effective control of prices, and in most cases also of supply, has been obtained. For example, there has been no general remission of the Purchase Tax on clothing, but utility clothing, which unlike other clothing is manufactured under the close supervision of the Board of Trade, has during the past year been made free of Purchase Tax. Subsidies, moreover, have not been directed exclusively to price stabilisation but have also included expenditure incurred primarily for nutritional reasons, like the national milk scheme and the school meals scheme. In pursuance of this policy, control has been extended step by step over the prices of food and other essential commodities, and in respect of food prices control now covers probably 90 per cent. of the average housewife's expenditure. The cost of the stabilisation policy to the Exchequer has been substantial, and it is now running at the rate of about £180,000,000 a year, but it has been of great benefit, not least to those who depend upon small fixed incomes.

The objects of the price and subsidy policy may be summed up as a substantial effort not only to stabilise the cost-of-living index but at the same time, in conjunction with measures of rationing and control of distribution, to secure adequate supplies of essential articles to all sections of the community. It may, I think, be fairly said that, in the result to-day, not only has the war-time distribution of the available goods and services worked fairly and with little or no likelihood of hardship, but the foundation has been laid for an improved nutritional standard for the nation as a whole, especially when account is taken of the special schemes, such as the national milk scheme and the vitamins scheme run by my right hon. Friend the Minister of Food with such success. Certainly it can be said that the whole policy has, in its achievement, marked a great improvement over the course of events during the last war, when after three and a half years of war the cost-of-living index was nearly 90 per cent. above the pre-war figure as compared with a rise of only 28 per cent. between September, 1939, and March, 1943, while for the same period in the last great war food prices rose by 108 per cent., as compared with 20 per cent. in his war.

WAGES POLICY

I must again point out that the stabilisation policy and the wages policy set out in the White Paper of July, 1941, are complementary. The former is dependent on the latter and at the same time renders it possible. The stabilisation policy has obviated the necessity of increases in wages where automatic adjustments are linked to the cost-of-living figure. Since September, 1939, the average increase in wage rates has been rather more than the increase in retail prices shown by the cost-of-living index. The average increase in weekly earnings has, of course, been much greater on account of greater output and longer hours. On any calculation of the prices of necessaries the rise in the cost of living is far below the net increase in earnings. It is my duty to say again that this valuable but costly stabilisation policy depends upon the wise use of our machinery for wage negotiations. There is still need for vigilance. Increases in wages, properly and fairly justifiable as they may be, do not make more goods available nor do they increase the general standard of living, and they may make it more difficult to secure a fair distribution of the limited supply of goods. But this also should be said, that while no system can give perfect results, our wages policy has also been successful in two important matters. It has helped to maintain the sense of responsibility and self-government which has characterised our industrial system for so many years. It has also done much to foster that industrial peace which has played such an important part in our war effort.

OBJECTIVES OF FINANCIAL POLICY

I have now completed my necessarily condensed general review of a period of economic and financial problems unprecedented in their size and complexity. In all we have done we have had three essentials in mind. First, we have sought to assist the war effort by ensuring that war production suffers no hindrances from unsound economic conditions. Secondly, we have endeavoured to do this in such a way that our people, united in the firm will to work and produce to the utmost, may be secure in the knowledge that their standard of living will not be filched away by rising prices. Thirdly, we have sought so to order our economy now that the inevitable consequences of the war will


prejudice as little as possible our financial and economic ability to engage ourselves in those progressive developments which we all desire to achieve and upon which we are already engaged. We must steadily continue with those objectives, but I think it can be said without exaggeration that with the full co-operation of our people a large measure of success has already been obtained in all these vital and far reaching matters.

I think hon. Members will find, when we come to consider the financial prospects for this year, that it will be convenient to have the corresponding figures for 1942 more or less fresh in their minds. Accordingly, in order not to disturb the continuity of our review of 1942 and 1943, I will refer now to one or two taxation matters of general interest not directly related to the finances of any particular year, and I will mention certain amendments which I am proposing to make in the taxation law, and also certain changes in Post Office charges.

EXEMPTION FROM PURCHASE TAX OF CERTAIN UTILITY GOODS

The Committee will remember that in my last Budget, after consultation with my right hon. Friend the President of the Board of Trade, I announced the exemption from Purchase Tax of utility cloth and clothing, including boots and shoes, made in accordance with the specifications prescribed by the Board of Trade, and later in the year I introduced a similar exemption in respect of utility furniture. I now propose to make another important exemption by freeing from the tax all utility cloth, whether in the piece, shaped or partly made up, which is not already exempt, as well as textile articles of a kind used for domestic purposes, soft furnishings and haberdashery which comply with my right hon. Friend's utility conditions. The list of articles affected is too long to be given in extenso, but I may perhaps mention utility black-out cloth, towelling, handkerchiefs, bed linen and mattresses, as examples of the sort of thing which will benefit from this remission of tax. Of course, it behoves everyone to be as economical as possible in the consumption of these, as of other goods, but where a purchase is really necessary we desire, particularly in view of the wider national considerations, to achieve economy in materials and in processes

of manufacture, thereby easing the strain upon labour and factory space. When these exemptions are added to those of utility clothing, footwear and furniture, which I have already mentioned, much will have been done to reduce the cost of a wide range of sound and serviceable articles in war-time household budgets. Subject to the approval of the House, a Treasury Order will be made in due course giving effect to these proposals as from 3rd May. The cost to the taxpayer will be about £6,000,000 in a full year.

HOUSEKEEPER AND DEPENDENT RELATIVE ALLOWANCES

In the course of the Finance Bill Debates last year, a number of my hon. and right hon. Friends, in all parts of the House, pressed for an extension of the housekeeper and dependent relative allowances, and urged that at the present high level of taxation considerable hardship arose from the conditions attached to these allowances. The Committee will remember that, while I had to point out the difficulty of making in war-time concessions which had been refused in peace-time, I promised that these representations should receive my consideration before this year's Budget. I have decided, in the light of this consideration, to propose certain reliefs, which are directed to meeting certain broad and clearly defined types of cases in which substantial hardship may exist and where it has certainly been accentuated by our present heavy taxation.

My first proposal is to widen the scope of the housekeeper allowance. The existing law gives a deduction of £50 from income in respect of a housekeeper maintained by a taxpayer who is a widower or a widow, or in respect of a widowed mother or other female relative maintained to look after young brothers and sisters. The allowance for a widower or a widow was originally given only where there were young children to be cared for, but in 1924 this condition was dropped, with the result that the widower or the widow obtains the allowance merely on the ground of the maintenance of a resident housekeeper. Although I do not propose to disturb it, I am not sure that this extension of 1924 was a wise one. It was a great source of complaint on behalf of other taxpayers that they had not the same allowance as the childless widow or widower if they employed a


housekeeper. My proposal for widening the sphere of the housekeeper allowance is founded primarily on the presence in the home of young children and the absence of a wife who can perform the normal maternal duty of looking after the home and the children. I propose, accordingly, to extend the scope of the housekeeper allowance so as to grant it to any taxpayer who is entitled to the Income Tax reliefs in respect of a child or adopted child and employs or maintains a resident housekeeper. There must be the proviso that the taxpayer is either entitled to a single personal allowance or, if entitled to the married personal allowance, can show that the wife is permanently incapacitated, and that he must, therefore, have a resident housekeeper.

This will extend the relief to the following types of cases not covered by the existing law: First, the single taxpayer who has to maintain young brothers and sisters is at present entitled to the housekeeper allowance only for his widowed mother or a female relative, but under my proposal he will get the allowance for a resident housekeeper, even though she is not a relative. Secondly, where, owing to separation or divorce, the family does not include husband and wife and the married allowance is therefore not due, the spouse maintaining the children and entitled to the Income Tax allowance for the children will be able to claim the housekeeper allowance for a resident housekeeper employed to look after the home and the children. Thirdly, where the wife is permanently incapacitated and there are young children qualifying for the Income Tax allowance, the housekeeper allowance will be given to the husband who employs a housekeeper to look after the home and the children. The type of incapacity which has been particularly pressed is that of the wife who is permanently incapacitated and, by reason of physical or mental illness, is no longer in the home, but I do not propose to limit the new relief to such a type of case. It will extend also to cases where the wife is still at home, provided it is established that she is totally incapacitated throughout the year of assessment. This is a condition that I must emphasise. I do not think, however strong the human appeal may be, that I could propose an allowance for

the cost of a housekeeper where the incapacity of the wife may have existed for only part of the Income Tax year. I ask the Committee to accept what I propose as meeting the general case as well as anyone can expect it to be met, at any rate in war-time. The proposed extension of the housekeeper allowance will cost £2,000,000 in a full year, and I am advised that this extension of the relief will benefit about 100,000 householders.

I now come to the dependent relative allowance. This allowance is a deduction of £25 from income in respect of a dependent relative who is incapacitated by old age or infirmity, and whose income from all sources does not exceed £50. I propose to increase the allowance from £25 to £50, which will bring it more into accord with the allowance for a wife and the allowances for children. I also propose, in order that the full value of the concession may be obtained, to replace the existing income limit of a flat maximum of £50 by a marginal arrangement based on the existing personal allowance of £80. At present the grant of the allowance is limited to the case of a dependent relative whose income does not exceed £50. If his income is just below that figure, the full rate of the allowance is granted. If it is just above, no allowance is given. I propose that, where the dependent relative has an income of £30 or more, the allowance shall be adjusted in such a way that the total of income and allowance together will amount to £80. The effect of this will be that nearly 500,000 dependent relatives with incomes of between £50 and £80, who are at present excluded from the allowance, will be brought within the scope of the concession.

Many of those who will now be included for the first time will be old age pensioners who, as a result of the extension of supplementary pensions, have an income of just over £50 and have hitherto been outside the present arrangement. At the other end of the scale, the cases in which the income is below £30 will qualify for the whole benefit of the increase of £25 in the allowance, while those cases where the income is between £30 and £50 will qualify for increased benefits in varying proportion. A further benefit which will flow from the increased allowance proposed is that it will remove the anomaly of the case of the invalid child who has reached 16 years of age. The


Committee will remember that at this point the case becomes one of the dependent relative allowance, instead of the child allowance, and accordingly the amount of the allowance has hitherto fallen from £50 to £25. This will no longer be so, and the full allowance of £50 will continue to be granted. The increase of the allowance to dependent relatives will cost about £7,000,000 in a full year. I commend these proposals to the Committee for their acceptance, and I hope the Committee will recognise that, in the present financial circumstances, they represent a sincere endeavour to meet the wishes of the House in regard to the tempering of the Income Tax charge so as to bring relief to cases of hardship, particularly at the present difficult time.

TAXATION ON INDUSTRY

I now wish to say something about tax matters and industry. The Committee will remember that during the course of the Finance Bill Debates last year various questions concerning the incidence of Excess Profits Tax and Income Tax on industry came more than once under discussion. I invited the representatives of industry to enter into consultations with the Board of Inland Revenue. A series of discussions have taken place with representatives of the principal industrial and commercial bodies and of the accountancy profession, and they have covered many questions. They have been most useful, and progress has been found possible on a number of matters. One matter of major importance which was considered is the question of what is known as terminal losses—that is, the expenses or losses that may be involved in changing back from war-time to peace-time conditions. This is mainly an excess profits question, and it is recognised by industry that it is one which cannot be dealt with in detail at the moment and must be left over generally until after the war, but I think industry is entitled to an assurance—which I give—that steps will be taken to see that all the expenses of a revenue nature which have been incurred in earning the excess profits will be allowed as a deduction in computing the liability to Excess Profits Tax. This is done in the ordinary course where the expenditure actually takes place during the life-time of the Excess Profits Tax, but in certain circumstances it may happen that the actual expenditure takes

place after the termination of the tax. This, of course, depends essentially on the life of the tax.

A particular example, and one which it has been found possible to deal with on a provisional basis during the life of the tax, is the question of those repairs and renewals which have fallen due to be carried out but, owing to the exigencies of the war, cannot be carried out now, and are therefore being deferred until the end of the war. Industry has to put by a reserve to meet those expenses, but the law allows no deduction for such a reserve. In such a case it is the practice of the Inland Revenue authorities to hold a part of the Excess Profits Tax charge in suspense, and this is done in order to give immediate relief, as though the repairs and renewals had actually been carried out during the war. When, after the end of the war, the deferred repairs and renewals are in fact carried out, the tax held in suspense, after making any necessary adjustments by reference to the expenditure actually incurred, will be discharged. Discussions have taken place with a view to simplifying the procedure in this matter, and a satisfactory working arrangement has been come to. The form of procedure for claiming the allowance involved a special investigation, which absorbed an amount of expert time which industry could ill afford, and the Inland Revenue authorities have agreed to dispense with that detailed investigation and to found the provisional allowance on the measure of the repairs and renewals which were carried out annually before the war.

Another example is the cost of changing from war-time to peace-time conditions in regard to the lay-out of factories and the restoration of units which may have been dispersed. Any expenditure of this nature borne by the taxpayer in the change-over from peace-time to war-time conditions will already have been allowed for taxation purposes, and I have agreed that similar treatment should be accorded to the corresponding expenses, so far as borne by the taxpayer, in changing back from war-time to peace-time conditions, and that for the purposes of Excess Profits Tax these expenses should be related to the Excess Profits Tax period if it should happen that the tax comes to an end before the change back has taken place.

There is another important question. The return of industry from war production to peace production may involve the scrapping of buildings, plant and machinery which have been provided as part of the war effort. The law already provides relief both for Income Tax and for Excess Profits Tax in respect of any loss so incurred, and I agree that this relief should not be confined to cases where the equipment is actually scrapped but should cover also any loss of value in the case where the equipment may continue in use.

Another matter which, I understand, causes concern with industry is the treatment of losses in the event of a fall in value of stocks occurring after the war. In the Excess Profits Duty of the last war there was special provision in regard to post-war stock depreciation in the Finance Act, 1921, and I can now say that I certainly recognise that, at the end of the Excess Profits Tax, it may well be necessary to consider the question of a similar provision. Consideration, however, of this question and the precise nature of the provisions which may be required must obviously be deferred until the end of the war, when it can be undertaken in the light of conditions then prevailing.

In addition to this question of terminal losses, there is the more general question of the incidence of the Income Tax on industrial profits, which has been represented to me as a matter of post-war fiscal policy of great importance in relation to post-war reconstruction. I have in mind, in particular, the position of profits that are not distributed but are ploughed back into the business, and the treatment of capital expenditure, for which no allowance is made in the existing taxation code. I agree that this and other questions call for the most careful consideration, and in fact very full representations have been made to me—[An HON. MEMBER: "I bet they have."]—by the representative bodies of industry, commerce and accountancy, who have already had discussions with the Board of Inland Revenue. I believe it will be most advantageous that discussions on these matters should be carried still further. The Committee will appreciate that it is not sufficient to consider these important matters on the plane of general argument alone. It is necessary to look closely at the facts, and, above all, to find out what

is the real effect of the tax provisions in actual cases over a period of time. That is why I hope, as the next step, to set on foot a detailed examination by the Board of Inland Revenue of the various matters which have been raised, for they are not only matters of moment for industry itself, but they have a wider importance in the general sphere of economic policy. This, of course, will take some little time, and the various matters will obviously, at the appropriate time, have to be considered by the Government and by Parliament.

One other matter which has been under consideration since last year is the treatment for Excess Profits Tax purposes of concerns operating wasting assets. Section 31 of the Finance Act, 1941, gives relief from Excess Profits Tax to concerns engaged in mining metal or getting oil in cases in which production has been accelerated in the interests of the war effort, with the result that profits are brought into the charge to the tax which otherwise would not have arisen until a later period, when the tax might no longer be in force. Similar conditions have been found to exist in the case of certain minerals, such as sand and gravel, and I propose in the Finance Bill to extend the relief to these cases also. I am also proposing to provide relief in cases where normal management practice, both in the mining of metals and in the getting of oil, has been departed from in order to accelerate production for the war, but in such a way that working costs after the war will be increased. The measure of relief to be given is necessarily rather complicated, and the Committee will not expect me at this stage to explain it in detail, as there will be an adequate opportunity of doing this when we come to the Finance Bill.

POST OFFICE CHARGES

This is a convenient opportunity for me to refer to increases which my right hon. Friend the Postmaster-General is proposing in the charges for certain Post Office services, namely, trunk telephone calls and inland telegrams, which he will explain during the Debate. The Government have reviewed the matter of man-power as it affects the Post Office and consider it is desirable that a further contribution should be made by that Department. These increases in charges, therefore, are proposed, not in the interests of the Revenue, on which the effect is small, but


to economise man-power by discouraging unnecessary use of the services in question. Full details will be found in the Financial Statement. In speaking of the Postmaster-General, may I refer for one moment to him in his old and honoured position as the late Financial Secretary to the Treasury? He will be greatly missed by the Treasury and not least by the Chancellor of the Exchequer. My right hon. and gallant Friend was Financial Secretary for three and a half years, and he took part in six Budgets, and I think I can say, with the assent of the whole Committee, he was an able, conscientious, accessible and resourceful Financial Secretary.

REVIEW OF 1942–43

I now turn to a review of our finances during 1942–43 and of the prospects for the year that has just begun. A year ago I estimated that our total Budget expenditure during 1942–43 would be £5,286,000,000, including £4,500,000,000 for Votes of Credit. Overseas dis-investment and the Canadian Government's contribution were expected together to amount to £786,000,000, leaving £4,500,000,000 as the total requiring domestic finance. Revenue, excluding the Canadian Government's contribution, was expected to produce £2,400,000,000, so that the amount left to be borrowed from domestic sources was £2,100,000,000, and I explained how this sum could be raised on sound lines. In the event we have had to borrow at home rather more than I anticipated.

The total Vote of Credit expenditure was £4,840,000,000, or £340,000,000 more than my estimate, and, including an increase on the Civil Votes due primarily to supplementary pensions, our total expenditure, at £5,637,000,000, was £351,000,000 more than the original Budget estimate. The Vote of Credit figure includes appreciable sums for war damage payments which were excluded from my original estimate, but the main reasons for the increase, in addition to some steady expansion in production at home, are the growing tempo of the war operations abroad and the development of the system of Reciprocal Aid to our Allies, to which I have already referred. These being the main reasons, the Committee will, I believe, regard the increase in our

war expenditure as satisfactory rather than otherwise.

On the Revenue side, there was an excess of £47,000,000 on the Inland Revenue estimate. Surtax, Estate Duties and Stamp Duties yielded substantially the amounts estimated in the Budget. Income Tax yielded £94,000,000 more than was estimated, owing largely to the growth of profits and of wages earned on war production, but Excess Profits Tax and National Defence Contribution yielded £47,000,000 less than the estimate. This short fall in Excess Profits Tax does not mean necessarily any loss to the Exchequer, and it is no doubt largely due to the introduction of Tax Reserve Certificates. In previous years considerable sums have been deposited on account of assessments which would only become final after 31st March. During 1942 such sums were largely invested instead in Tax Reserve Certificates, which will not be presented until the due date for the payment of the tax, which may be during 1943 or possibly later. There is therefore a temporary adverse effect on the Budget receipts from excess profits tax revenue, but this should be made good during 1943–44. The Exchequer, of course, has had the use, through the certificates, of the accruing provision for tax, and, to a much greater extent than under the old system of advance deposits. The certificates, it will be remembered, carry no interest for the period between the due date of the tax and the actual payment.

Customs and Excise produced the handsome surplus of £80,000,000 over the Budget estimate of £805,000,000. The surplus is due mainly to tobacco £27,000,000, beer £14,000,000, and Purchase Tax £30,000,000. The consumption of tobacco and beer is still on a very high level, despite the greatly increased duties. Thus the weight of tobacco on which duty was paid in 1938–39 was 192,000,000 lbs., and that figure rose to 229,000,000 lbs. in 1942–43, an increase of no less than 19 per cent., despite the increase in duty. A small part of the 1942 revenue was no doubt due to some restocking by retailers, but, even so, the figures are a striking commentary on the persistence with which the smoking public clings to this form of optional expenditure despite a considerable increase in taxation. The same is true of beer. As the Committee is aware, supplies of brewing materials have been controlled, but as a result of substantial


reductions in the gravities of the beers brewed the quantity available to consumers has increased from 25,000,000 bulk barrels in 1938–39 to nearly 30,000,000 in 1942–43, showing in this case also an increase of about 19 per cent. That these high rates of consumption have continued possible is no doubt due both to the increase in personal incomes, particularly in the lower ranges, and to the measures we have taken to keep down the prices of necessaries.

The excess on the Purchase Tax appears to be due mainly to a much slower rate of diminution than was expected in supplies of taxable goods available to the public, coupled, in some cases, with a higher level of prices. The only other head of the Revenue on which I need comment is Miscellaneous Revenue, which includes receipts and contributions and premiums under the War Damage Act not included in the Budget estimate. Since expenditure under the Act during the year exceeded receipts, the whole of such receipts is included under this head.

The total revenue, excluding the Canadian Government's contribution, amounted to £2,595,000,000, an excess of £193,000,000 over the estimate, as against a total expenditure of £5,637,000,000. Towards this huge expenditure overseas disinvestment and the Canadian Government's contribution together provided some £850,000,000. We therefore required domestic finance for a sum of nearly £4,800,000,000. Domestic revenue provided £2,595,000,000, leaving £2,185,000,000 to be met by domestic borrowing, an increase of nearly £200,000,000 over the amount of our domestic borrowing in 1941, which in my last Budget I took as the criterion for our borrowings during 1942.

In examining how far the general soundness of the sources of our borrowing was maintained during 1942–43, I must remind the Committee that, as I explained last year, we have not yet got the figures for all these sources up to as recent a date as the end of March. I must again, therefore, first take as the basis for my examination the calendar year 1942, and then estimate how far the results for the financial year 1942–43 are likely to have differed from those of the calendar year. The Committee will remember that the White Paper starts with the figure of the total central Government expenditure in

the calendar year; then, by deducting the amount provided by overseas disinvestment, arrives at the figure requiring domestic finance. From this figure, by deducting first the central Government revenue, then the sums raised by borrowing from various specified sources, it arrives, finally, at a figure which we describe as the residue, and it is to this figure, or rather to the trend of the changes in this figure between one year and another, that we have looked as the criterion of the soundness of our borrowing operations from year to year.

The residue is made up, broadly speaking, of the balances of the depreciation funds and sinking funds in the hands of companies and institutions in so far as they have not been spent on replacements and renewals and after providing for other capital expenditure financed out of non-Government funds. Table A in the White Paper shows that for the calendar year 1942 the estimated residue was about of the same order as in 1941, namely, £175,000,000 to £200,000,000. To pass from the calendar year to the financial year 1942–43, we have to allow for the fact that, while both expenditure and revenue were higher in the financial year than in the calendar year, we had, in the result, to borrow rather more in the financial year than in the calendar year. Allowing, however, as we clearly may, for some increase in savings, the residue for the financial year 1942–43 will still have been of the same order as that in the calendar year 1941. The general object of maintaining our finances in the same sound conditions as those of 1941, was, therefore, realised, in spite of a great and progressive increase in expenditure.

EXPENDITURE IN 1943–44

With these figures for 1942 fresh in our minds, I turn to the prospects for 1943. On the expenditure side, I must this year provide £375,000,000 for the fixed Debt charge, the increase of £64,000,000 over the cost of interest and management during 1942 being due, of course, to our continued war borrowings. As in previous years, I shall ask for power to borrow any additional sum necessary to cover the contractual sinking funds. Other Consolidated Fund services are put at the same figure, £17,000,000, as in 1942. The total of Civil Votes is £464,000,000. It shows an increase of


£20,000,000 on last year's Budget estimate and an increase of £8,000,000 on the actual expenditure in 1942. The increase over last year's Budget estimate is due, mainly, to an increase of £13,000,000 for supplementary pensions and to smaller increases for education, old age pensions and labour and man-power services, offset by a saving of £2,000,000 on assistance allowances.

As regards Vote of Credit expenditure in 1943, I have already referred to the generous assistance which the Canadian Government are giving us during the year. That assistance enables me, of course, to make an appreciable reduction in the provision which I should otherwise have to make for Vote of Credit expenditure, and on that basis I put the total at £4,900,000,000. As in previous years, that figure makes only nominal provision for expenditure on war damage, and receipts under the War Damage Act will also again be excluded from my revenue figures.

SOURCES OF FINANCE IN 1943–44

The total expenditure to be provided in the Budget for 1943 is thus £5,756,000,000. Towards that total, it is estimated that overseas disinvestment will provide £600,000,000 or slightly less than in 1942 without the Canadian Government's contribution. That means that the figure of expenditure requiring domestic finance is £5,156,000,000. I am proposing to ask the Committee for new taxation which will raise the total of domestic revenue to £2,900,000,000. This will leave about £2,250,000,000 to be covered by domestic borrowing, some £60,000,000 more than in 1942–43. Towards such borrowing, £425,000,000, or about the same as in 1942, will be available from extra-budgetary funds, local authority surpluses, and the war risks and war damage payments in the hands of the public. On the trend of the figures for the last two years, we cannot count on an appreciable increase in undistributed profits, which I put at £350,000,000. In view of the prospect of some further expansion of the national income, I am justified, as last year, in expecting personal savings to show an increase, and I am assuming that, including provision for accrued taxation, they will reach about £1,300,000,000 as compared with £1,170,000,000 in the calendar

year 1942. On that basis, I estimate that the domestic borrowing of £2,250,000,000 would thus leave a residue, to be financed in the way I have just explained, of £175,000,000, or still of the same order as the basic figure for 1941, and the probable residue for the last financial year. If we succeed in establishing that position, we are, I think it will be agreed, continuing to keep the finances of the State on a firm and even keel.

I have proposed that we should raise about £2,900,000,000 by domestic revenue, and the Committee will now wish to hear what the revenue would be on the existing basis of taxation.

INLAND REVENUE DUTIES

As regards Inland Revenue Duties, I put the yield of Income Tax at £1,175,000,000, an increase of £168,000,000 over the out-turn in 1942–43, this being due to the effect on various classes of incomes, including wages, of the very high level which has been reached by war production. The estimate allows for the concessions which I have announced in regard to allowances for dependent relatives and housekeepers. The Excess Profits Tax I estimate to yield £500,000,000. Here, again, the substantial increase of £122,000,000 on last year is due to the effect of the high level of war production and the fall in advance deposits during 1942 to which I have already referred. Estate Duties are estimated to yield £100,000,000, which is £7,000,000 more than the amount received last year, an increase due to the steady improvement in security prices. I expect Surtax to yield £80,000,000, Stamps £17,000,000, and Miscellaneous Duties £1,000,000, making a total for Inland Revenue of £1,873,000,000.

CUSTOMS AND EXCISE REVENUE

As regards Customs and Excise, the supply of many dutiable articles is subject to restriction and control, so that the revenue is largely determined by this factor, and, in general, the estimates reflect this position. I have put the Purchase Tax estimate at £90,000,000—the amount actually received last year having been £110,000,000—in anticipation of the increasing effect of the Board of Trade limitations on manufacture and supply, coupled with the fact that the changes which I introduced in the tax last year will operate for a full year instead


of only a part, as in 1942–43. In the aggregate, the Customs and Excise estimate on the existing basis is put at £873,000,000, or £12,000,000 less than the revenue I received last year.

MISCELLANEOUS REVENUE

As regards the remaining heads of revenue the only item calling for comment is Post Office revenue, the net receipts from which will practically disappear as the result of an accounting charge which is explained in the Financial Statement. Miscellaneous Revenue, including the Post Office, is estimated to produce £59,000,000, so that the total revenue on the existing basis of taxation is estimated at £2,805,000,000 or about £100,000,000 below the target of £2,900,000,000 which I mentioned just now.

NEW TAXATION

It follows, therefore, that I have to propose additional taxation of that order in the current year. There is, in fact, a two-fold justification for this, first, the rising cost of the war and the consequent increase in the excess of expenditure over revenue, part of which we must certainly pay for as we go and, secondly, the necessity for curtailing purchasing power still further by additional taxation.

In considering how the additional taxation should be imposed, the facts of the situation lead me to the same broad conclusions as they did when I opened my Budget a year ago. Apart from the financial considerations I have already mentioned, the primary object of the new taxation must be further to reduce purchasing power, and its type and method must be designed accordingly. For that purpose some significant figures will be found in the special White Paper. Table F shows that 83 per cent. of the total of all individual incomes remaining in 1941–42, after payment of Income Tax and Surtax, was found in the range of incomes up to £500. Further, Table II shows that whereas the total of personal incomes increased by £668,000,000 during 1942, no less than £439,000,000 of that increase occurred in the wages group. It is clear that if the object of the additional taxation is to be achieved, it must be as widely spread as possible, and it must deal with the excess purchasing power in the lower as well as in the higher ranges of income. We must also remember that while many

millions of incomes have increased during the war and continue to increase, there are large numbers which remain fixed and not a few which, as a result of the war, have diminished. Income Tax is framed to take account of capacity to pay and is generally acknowledged as a fair tax, but in these times of drastic and unequal changes of income, a blending of direct and indirect taxation is the appropriate way of tempering the severity with which the necessarily heavy tax burden falls on the most difficult cases. As I have already pointed out, the extra burdens imposed during the war, excluding Excess Profits Tax and National Defence Contribution, have so far been higher on the direct than on the indirect side, and on the existing basis of taxation the disparity would grow greater during the year.
Such considerations have led me quite clearly to the conclusion that on this occasion I ought not to increase our direct taxation, and that any additional taxation should take the form of levying a further toll on expenditure which can, if necessary, be avoided or curtailed. I think the Committee will agree, therefore, that I have no option but to increase some of the indirect taxes. I think they will, in fact, have been partly prepared for that conclusion by the figures of consumption which I gave just now for liquor and tobacco. The facts that despite the heavy war-time increase in duties consumption has risen to such a high level and that the demand continues in some cases to exceed the supply suggest that expenditure on tobacco and beer is a proper subject for increased taxation. Spirits and wines fall naturally into the same category; and in view of the continued heavy attendance at cinemas and theatres, I do not think any elaborate justification is needed for an increase in the Entertainments Duty. These are stern times, and the longer this exacting war goes on the stronger are the reasons why, if further taxation is to be imposed, it should be borne, not by those who, whatever the size of their incomes, are already making a heavy, if not a maximum, contribution to taxation and savings, but by those who have at any rate some money to spare for expenditure of the kinds I have mentioned. I will now give the Committee the details of the increases which I propose.

BEER, SPIRITS AND WINES

On beer, I propose to raise the duty by an amount which will represent one penny per pint on the retail price of draught beer of the present average gravity. On the high gravity beers the increase will exceed this figure, and prices of these must be expected to rise by more than a penny per pint. At the same time there will be a further increase, not to be passed on to the consumer, related to changes in the cost of brewing materials during the coming year, and this will require a further consequential adjustment next year. Particulars of the new rates will be found in the Financial Statement. The total yield of the increases, which will come into effect to-morrow, is estimated at £33,000,000 in a full year and £28,500,000 this year.

On spirits, which continue to be in such short supply that prices have failed to effect an equilibrium with the demand, I propose an addition of £1 per proof gallon, equivalent to 2s. 4d. per ordinary bottle of whisky or other spirits, counting six bottles to the gallon at a strength of 30 degrees under proof. This increase in duty also dates from to-morrow and is estimated to produce not quite £9,000,000 in a full year and over £8,000,000 this, year.

Together with the increases in the Beer and Spirit duties, I propose, also, to raise the duty on imported wines and on British wine. Both these groups are in short supply, faced with an unsatisfied demand. The main increase will be 3s. per gallon on light wines, including British wines, and 6s. per gallon on heavy wines. Full details will be shown in the White Paper. The increases will date as from to-morrow and are estimated to yield rather less than £1,000,000 in a full year and £800,000 this year.

TOBACCO

As regards tobacco, I propose to increase the duties by a further 6s. per lb. on the unmanufactured leaf, with a corresponding increase in the duties on imported cigars, cigarettes, etc. In connection with the Tobacco Duties, I made it clear in my Budget speech last year that the preference on Empire tobacco would be reviewed in the light of the undertaking given in the 1938 Trade Agreement with the United States of America, whereby His Majesty's Government agreed to consider the possibility of reducing the margin

of preference on Empire tobacco when the 10 years guarantee under the Ottawa Agreements expired in 1942. A Sub-section was included in the Finance Act, 1942, extending the period of guarantee under this Bill to April, 1943, at the latest, in the expectation that by then a definite decision would be reached in the matter. It is now proposed to reduce the present preference margin of 2s. 0½d. per lb. on tobacco leaf by 6d., and proportionately on other tobacco, and the reduction will be effected by an increase in the Empire rates of duty. All these changes will take place from to-morrow. They will, I understand, amount to an extra 4½d or 5d. per ounce of pipe tobacco, according to the quality, and an extra 1½d. on a packet of 10 cigarettes now sold retail at 9d., and an extra 2d. on those now sold for 1s.

The Committee will remember that when the Tobacco Duties were increased last year special arrangements were made whereby members of the Armed Forces in this country and their associated Women's Services were allowed to purchase cigarettes and tobacco at pre-Budget prices at N.A.A.F.I. and certain other canteens. I propose to extend this concession to the present increases in duties. That is to say, tobacco and cigarettes sold under the 1942 canteen arrangements will continue to be available, under the same conditions as last year, at the prices which have operated since the 1941 Budget.

The gross gain to the revenue from these changes in Tobacco Duties is estimated to be £58,000,000 in a full year, and £57,000,000 this year. The net gain to the Exchequer will be less than this, because of the concession to the Services, but for obvious reasons the cost of that concession cannot be disclosed.

ENTERTAINMENTS

I now come to entertainments. I am increasing the Entertainments Duty both on the full scale applicable to cinemas, etc., and on the new reduced scale applicable to theatres and other living entertainments. The increases will apply throughout the range in prices in both cases with the important exception that no increase will be made in the duty on any seats, either in theatres or in cinemas, for which the present price to the public is 1s. or less. This represents a change from the arrangements that applied last year to the cinemas, when the exemption from the


increase of duty was limited in their case to seats of 7d. or less. In view of this and of the different conditions obtaining generally in the living theatre compared with the cinema—a matter in which hon. Members in all parts of the House have taken a keen interest—I have felt justified in proposing a more modest series of increases in the scale applicable to the theatres than in the full scale. Particulars of the increases, which will come into effect on 16th May, will be found in the Financial Statement. The estimated yield is about £9,000,000 in a full year, and about £8,000,000 this year.

LUXURY GOODS

The Committee will recall that with general approval the Purchase Tax on luxuries and non-essential goods was increased last year from 33⅓ per cent. to 66⅔ per cent. Even those who objected to the Purchase Tax in principle did not oppose further taxation on articles which cannot be regarded as essential under the conditions in which we are living to-day—such as ornaments, jewellery, silk dresses, fur coats and other things which are enumerated in the Seventh Schedule to last year's Finance Act. That taxation has not been without effect, but, even so, I think further action is necessary and desirable. I propose, therefore, to increase the tax on these articles from 66⅔ per cent. to 100 per cent. ad valorem. As last year, the increased taxation will apply to all such goods delivered after to-day, in order that forestalling may be avoided. Registered traders will again be given the right to adjust their contracts to meet the increased liability. The increase of the tax yield on this account will be of the order of £6,000,000 in a full year, but, having regard to the further concessions I have made on utility goods, the total yield of the tax is unaffected.

SUMMARY

The total revenue I expect to receive from this additional taxation amounts to £102,000,000 in the current year and £110,000,000 in a full year. The total revenue for the current year will, therefore, be £2,907,000,000. Of the £5,156,000,000 for which we have to find domestic finance during the year, we shall be providing 56 per cent. from current revenue. That percentage compares with 48 per cent. during the calendar

year 1941, and 52 per cent. during the calendar year 1942. Such a result continues to represent, I know, a very great degree of sacrifice by all members of the community, but it is worth making, for it enables us to keep our financial and economic life in that sound and healthy condition which has already, as I believe, been such a powerful aid to the war effort and will help us so much after the war. I therefore commend these proposals to the Committee. I do not doubt that they will be willingly accepted by our people, who have played so great a part in the financial field. They once again represent our determination to see that nothing we can do is left undone to achieve early victory and that we go forward unceasingly and unflinchingly until the issue is decided by the triumph of the right and a free and decent world is assured for all mankind.

1. BEER (EXCISE)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three, the duty of excise charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:

£
s.
d.


For every 36 gallons of worts of a specific gravity of 1,027 degrees or less
6
18
4½


For every 36 gallons of worts of a specific gravity exceeding 1,027 degrees—





For the first 1,027 degrees
6
18
4½


For every additional degree in excess of 1,027 degrees

5
1½


and so in proportion for any less number of gallons;

and, in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the excise drawback allowed under that section shall be allowed at the following increased rates:

£
s.
d.


For every 36 gallons the worts whereof were, before fermentation, of a specific gravity of 1,027 degrees or less
6
18
6½


For every 36 gallons the worts whereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—





For the first 1,027 degrees
6
18
6½


For every additional degree in excess of 1,027 degrees

5
1½


and so in proportion for any less number of gallons:

Provided that, as respects beer the worts whereof were, before fermentation, of a specific gravity of less than 1,027 degrees, the amount


of drawback allowable shall not exceed by-more than twopence for every 36 gallons the amount of duty which is shown as aforesaid to have been paid.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

2. BEER (CUSTOMS)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three, the duty of Customs charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:—

For every 36 gallons the worts whereof were, before fermentation, of a specific gravity of 1,027 degrees or less—
£
s.
d.


Forevery 36 gallons the worts whereof were, before fermentation, of a specific gravity of 1,027 degrees or less—





In the case of beer being an Empire product
6
18
9½


In the case of beer not being an Empire product
7
18
9½


For every 36 gallons the worts whereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—





In the case of beer being an Empire product—





For the first 1,027 degrees
6
18
9½


For every additional degree in excess of 1,027 degrees

5
1½


In the case of beer not being an Empire product—





For the first 1,027 degrees
7
18
9½


For every additional degree in excess of 1,027 degrees

5
1½


and so in proportion for any less number of gallons;

and, in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the Customs drawback allowed under that Section shall be allowed at the following increased rates:—

For every 36 gallons the worts whereof were, before fermentation, of a specific gravity of 1,027 degrees or less—
£
s.
d.


In the case of beer being an Empire product
6
18
6½


In the case of beer not being an Empire product
7
18
6½


For every 36 gallons the worts whereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—





In the case of beer being an Empire product—





For the first 1,027 degrees
6
18
6½


For every additional degree in excess of 1,027 degrees

5
1½

Provided that, as respects beer the worts whereof were, before fermentation, of a specific gravity of less than 1,027 degrees, the amount of drawback allowable shall not exceed the amount of duty which is shown as aforesaid to have been paid, less threepence for every 36 gallons.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

3. SPIRITS (EXCISE)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three, the rate of the duty of excise charged on spirits by Section three of the Finance Act, 1920, in addition to the duties specified in Part III of the First Schedule to that Act, shall be increased to seven pounds seventeen shillings and sixpence per gallon computed at proof.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

The Chairman: The next Resolution contains a complicated Table which I will read if any hon. Member desires it but otherwise, with the leave of the Committee, I propose to take the Table as read. There are other Resolutions containing similar Tables where, again with the agreement of the Committee, I would propose to adopt the same course. May I take it that the Committee is agreed?

HON. MEMBERS: Agreed.

4. SPIRITS (CUSTOMS)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three, the duties of customs charged on spirits of the descriptions set out in the first column of the following Table by Section three of the Finance Act, 1920, in addition to the duties specified in Part II of the First Schedule to that Act, shall—

(a) in the case of spirits being Empire products, be charged at the increased rates shown in the second column of that Table; and
(b) in the case of spirits not being Empire products, be charged at the increased rates shown in the third column of that Table.

TABLE


Description of Spirits
Preferential Rates
Full Rates


In cask
In bottle
In cask
In bottle


For every gallon computed at proof of—
£
s.
d.
£
s.
d.
£
s.
d.
£
s.
d.


Brandy or rum
7
17
10
7
18
10
8
0
4
8
1
4


Imitation rum or geneva
7
17
11
7
18
11
8
0
5
8
1
5


Unsweetened spirits other than those already enumerated
7
17
11
7
17
11
8
0
5
8
0
5


For every gallon of perfumed spirits
12
12
0
12
13
0
12
16
0
12
17
0


For every gallon of liqueurs, cordials, mixtures and other preparations in bottle entered in such manner as to indicate that the strength is not to be tested
—
10
13
10
—
10
17
2


For every gallon computed at proof of spirits of any description not heretofore mentioned, including naphtha and methylic alcohol purified so as to be potable, and mixtures and preparations containing spirits
7
17
11
7
18
11
8
0
5
8
1
5

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

5. WINES (CUSTOMS)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three the duties of customs charged on wines under paragraph (a) and paragraph (c) of Sub-section (1) of Section three of the Finance (No. 2) Act, 1939, shall respectively be charged at the increased rates set out in Part I and Part II of the following Table, and the duty charged under paragraph (b) of that Sub-section on wine not exceeding twenty-seven degrees of proof spirit and being an Empire product shall be increased accordingly.

TABLE


PART I


Wines not being Empire Products


Description of Wine



Rate of duty per gallon.



£
s.
d.


Not exceeding 25 degrees proof spirit

17
0


Exceeding 25 degrees proof spirit and not exceeding 42 degrees proof spirit
1
14
0


For every degree or fraction of a degree above 42 degrees proof spirit, an additional duty

2
10


Sparkling, an additional duty
1
2
0


Still, in bottle, an additional duty

3
6

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

6. SWEETS (EXCISE)

Resolved,
That, as from the thirteenth day of April nineteen hundred and forty-three, the rate of the duty of excise on sweets shall be increased from one pound three shillings and ninepence to one pound ten shillings per gallon in the case of sparkling sweets, and from eleven shillings and sixpence to fourteen shillings and sixpence per gallon in the case of other sweets.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

7. TOBACCO (CUSTOMS)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three, in lieu of the full and preferential duties of customs theretofore chargeable on tobacco imported into the United Kingdom, there shall be charged on tobacco so imported of the descriptions set out in the first column of the following Table—

(a) in the case of tobacco not being an Empire product, duties of customs at the rates respectively specified in the second column of that Table; and
(b) in the case of tobacco being an Empire product, duties of customs at the rates respectively specified in the third column of that Table.

TABLE


Description of Tobacco
Rates of duty per pound


Full Rates
Preferential rates


Tobacco unmanufactured—containing 10 lbs. or more of moisture in every 100 lbs. weight thereof—
£
s.
d.
£
s.
d.


unstripped
1
15
6
1
13
11½


Stripped
1
15
6½
1
13
11⅞


containing less than 10 lbs. of moisture in every 100 lbs. weight thereof—








unstripped
1
16
6
1
14
9½


stripped
1
16
6½
1
14
9⅞


Tobacco manufactured, viz.:—








Cigars
2
4
1
2
1
1⅝


Cigarettes
2
0
7
2
18
2½


Cavendish or Negrohead
1
19
9
1
17
6


Cavendish or Negrohead manufactured in bond
1
18
0
1
16
0½


Other manufactured tobacco
1
18
0
1
16
0½


Snuff—








containing more than 13 lbs. of moisture in every 100 lbs. weight thereof
1
17
4
1
15
5⅞


containing not more than 13 lbs. of moisture in every 100 lbs. weight thereof
1
19
9
1
17
6


and so in proportion for any less quantity.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

8. TOBACCO (EXCISE)

Resolved,
That, as from the thirteenth day of April, nineteen hundred and forty-three, in lieu of the duties of excise theretofore chargeable on tobacco grown in the United Kingdom, there shall be charged on tobacco so grown of the descriptions set out in the first column of the following Table duties of excise at the rates respectively specified in the second column of that Table.

TABLE


Description of Tobacco
Rates of duty per pound


Tobacco unmanufactured—
£
s.
d.


containing 10 lbs. or more of moisture in every 100 lbs. weight thereof
1
13
9½


containing less than 10 lbs. of moisture in every 100 lbs. weight thereof
1
14
7½


Tobacco manufactured viz.:—





Cavendish or Negrohead manufactured in bond
1
16
0½


and so in proportion for any less quantity.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

9. TOBACCO (DRAWBACK)

Resolved,
That, as respects tobacco on which there have been paid duties of customs or excise at the increased rates for which provision is made by any Resolution of the Committee of Ways and Means together with this Resolution, drawback shall be allowed at the rates set out in the following Table instead of at the rates set out in Part III of the Fourth Schedule to the Finance Act, 1942.

TABLE


Description of Tobacco
Rates per pound


In respect of tobacco on which full customs duty has been paid
In respect of tobacco on which customs duty at a preferential rate or excise duty has been paid



£
s.
d.
£
s.
d.


Cigars
1
18
2
1
16
7½


Cigarettes
1
16
6
1
14
11½


Cut, roll, cake or other manufactured tobacco
1
16
3
1
14
8½


Snuff (not being offal snuff)
1
16
0
1
14
5½


Stalks, shorts or other refuse of tobacco including offal snuff
1
15
9
1
14
2½

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

10. ENTERTAINMENTS (EXCISE)

Resolved,
That as respects payments for admission to entertainments held on or after the sixteenth day of May, nineteen hundred and forty-three, other than payments made before the thirteenth day of April in that year, Entertainments Duty shall be charged—

(a) in the case of entertainments chargeable at reduced rates by virtue of Subsection (3) of Section one of the Finance Act, 1935, at the rates set out in Part I of the following Table;
(b) in the case of other entertainments at the rates set out in Part II of that Table.

TABLE


PART I


Reduced Rates


Amount of Payment.
Rate of Duty.


Where the amount of the payment, excluding the amount of duty—
s.
d.


exceeds 3d. and does not exceed 11½d.

½


exceeds 11½d. and does not exceed 1s. 3½d.

2½


exceeds 1s. 3½d. and does not exceed 1s. 5½d.

3½


exceeds 1s. 5½d. and does not exceed 1s. 7½d.

4½


exceeds 1s. 7½d. and does not exceed 1s. 9½d.

5½


exceeds 1s. 9½d. and does not exceed 1s. 11½d.

6½


exceeds 1s. 11d. and does not exceed 2s. 0½d.

8½


exceeds 2s. 0½d. and does not exceed 2s. 3d.

9


exceeds 2s. 3d. and does not exceed 2s. 7d.

11


exceeds 2s. 7d. and does not exceed 2s. 10d.
1
2


exceeds 2s. 10d. and does not exceed 3s. 2d.
1
4


exceeds 3s. 2d.
1s. 4d. for the first 3s. 2d. and 2½d. for every 6½d. or part of 6½d. over 3s. 2d.

PART II


Full Rates


Amount of Payment.
Rate of Duty.


Where the amount of the payment, excluding the amount of the duty—
s.
d.


exceeds 3d. and does not exceed 5d.

½


exceeds 5d. and does not exceed 6¼d.

¾


exceeds 6¼d. and does not exceed 7½d.

1½


exceeds 7½d. and does not exceed 8d.

2


exceeds 8d. and does not exceed 8¾d.

3½


exceeds 8¾d. and does not exceed 10½d.

7½


exceeds 10½d. and does not exceed 1s. 0½d.

8½


exceeds 1s. 0½d. and does not exceed 1s. 4½d.

10½


exceeds 1s. 4½d. and does not exceed 1s. 8d.
1
1


exceeds 1s. 8d. and does not exceed 1s. 9d.
1
3


exceeds 1s. 9d. and does not exceed 2s. 0d.
1
6


exceeds 2s. 0d. and does not exceed 2s. 2d.
1
7


exceeds 2s. 2d. and does not exceed 2s. 6d.
2
0


exceeds 2s. 6d. and does not exceed 3s. 0d.
2
6


exceeds 3s. 0d. and does not exceed 3s. 5d.
2
7


exceeds 3s. 5d. and does not exceed 4s. 2d.
3
4

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

11. PURCHASE TAX

Resolved,
That the higher rate of purchase tax shall, in the case of tax becoming due on or after the thirteenth day of April, nineteen hundred and forty-three, be one hundred per cent. of the wholesale value of the goods.

12. CHARGE OF TAX

Resolved,
That,—

(a) Income Tax for the year 1943–44 shall be charged at the standard rate of ten shillings in the pound, and, in the case of an individual whose total income exceeds one thousand five hundred pounds, at such higher rates in respect of the excess over one thousand five hundred pounds as Parliament may hereafter determine;
(b) all such enactments as had effect with respect to the Income Tax charged for the year 1942–43, other than such enactments as by their terms relate only to tax for that year, shall have effect with respect to the Income Tax charged for the year 1943–44.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

13. HIGHER RATES OF INCOME TAX FOR 1942–43

Resolved,
That Income Tax for the year 1942–43 shall be charged at rates exceeding the standard rate in the case of individuals whose total incomes exceed two thousand pounds, and those rates shall be rates in the pound which respectively exceed the standard rate for that year by the amounts specified in the second column of the Table in Sub-section (1) of Section seven of the Finance (No. 2) Act, 1940.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

14. SETTLEMENTS AND DISPOSITIONS

Resolved,
That any Act of the present Session relating to finance may contain such declaratory or other provisions as Parliament may determine as to the effect of the provisions of the Income Tax Acts relating to settlements or dispositions on settlements and dispositions where there is more than one settlor or party to the disposition.

15. EXCESS PROFITS TAX

Resolved,
That the extent and incidence of Excess Profits Tax (for past and future chargeable accounting periods) shall be varied so as to give effect to amendments as to the computation of profits and provisions relating to cases where stock in trade of a company is disposed of otherwise than for at least its full market value.

16. ESTATE DUTY

Resolved,
That the enactments relating to Estate Duty shall, in the case of persons dying after the twelfth day of April, nineteen hundred and forty-three, be amended as respects the definition of the property which is to be treated as derived from the deceased for the purposes of Sections thirty and thirty-one of the Finance Act, 1939."—[Sir Kingsley Wood.]

17. AMENDMENT OF LAW

Motion made, and Question proposed,
That it is expedient to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance."—[Sir Kingsley Wood.]

Mr. Arthur Greenwood: It is customary for someone who stands at this Box to make a few quite perfunctory remarks on the Chancellor's Statement which quite obviously no Member of this House, apart from any financial genius who may be here, can fully grasp. The Chancellor of the Exchequer, with a facility which I envy, juggled with hundreds and thousands of millions of pounds, and that only confirms my view that all these pounds, shillings and pence are meaningless symbols. Indeed, if I may say so, my right hon. Friend's speech, on which I congratulate him—particularly his remarkable analysis of the situation—really emphasised the fact that to-day goods and services matter more than anything else. Clause 7 of Lend-Lease, with which my right hon. Friend and I were concerned at one time, an arrangement between us and the United States since extended to other nations, is perhaps the most important understanding that has been reached between two

great nations. The balance-sheet, as my right hon. Friend quite rightly said, cannot be expressed in pounds, shillings and pence, but can only be expressed in services which are inestimable and incalculable. There is no way of measuring the great assistance that we have had from the United States and Canada, and indeed from the U.S.S.R., and the United States would find it difficult to assess in terms of money the assistance that we have given to them. I think we all realise that this reciprocal arrangement for mutual aid, honestly and sincerely carried out to the limit of every participant's capacity, is one of the real strengths of the power of the Allied Nations during the war.
I do not propose to go into any details about the Budget. A million pounds seems to me a meaningless symbol, never having seen and never being likely to be able to see £1,000,000, and therefore I pass over those figures and estimates, which will receive a good deal closer consideration by Members of the Committee than I could possibly give them, not being, I am told, a financial expert. I come, however, to the question of the increase of taxation. Of course, the nation will bear all the increased taxation that is necessary for the winning of the war. There can be no doubt about that, and of course there can be no serious objection taken to the increased taxation on what the right hon. Gentleman calls "optional expenditure." I suppose there are members who are guilty, even in war-time, of committing this crime of spending money that they could avoid spending, whether on tobacco, or exciseable liquors or by surreptitious visits to the cinema or the theatre. I think the whole Committee and the country will be grateful for the concessions the right hon. Gentleman has made with regard to utility clothing and Income Tax. I imagine that there may be criticisms of the fact that there is really no increase in direct taxation. I will say this to the right hon. Gentleman's credit, that the country would not perish from lack of sustenance if the things upon which he has increased taxation were cut out of our lives entirely, although in my view it might have a very bad effect upon the morale of the people. I think a little tobacco and beer and a little cinema or theatre for those who like them are perhaps some counter-balance to the black-out and the horrors of war-time.


The right hon. Gentleman has paid a tribute to the small Income Tax payers. In the nature of things indirect taxation falls relatively more heavily upon the poor than upon the well-to-do. That has always been the view of my hon. Friends and of many reputable economists, among whom I do not number myself. It is generally held that taxation of an indirect character, apart from luxury taxation—and many luxuries really become conventional necessities which some of us would find it hard to do without—bears more heavily on the poorer elements in the community than on those who are better off.
I do not myself regard these increases in indirect taxation as crushing. They are not pleasurable, but they are not crushing. There is, however, in my view a disparity between £33,000,000 new taxation in a full year on beer and £9,000,000 on spirits and only £1,000,000 in the case of wine. [Interruption.] Of course there is a shortage. There seems to be a shortage of lots of things. The real point is the capacity of the people to bear luxury taxation, and I should have thought that might have been put on a rather higher level. I do not think the people will complain very much in the mass at having to find another £9,000,000 for their entertainment, whether in the cinema or in the theatre, and I certainly think it rather drastic, but I can see no solid reason why the taxation of pure luxuries should not be at the rate of 100 per cent. ad valorem. I am sure that the people of the country are prepared to face all the taxation that is necessary to win the war, and I agree that it is important that we should do everything we can to discourage spending upon un-necessaries, and thereby to promote savings. I imagine that the Budget will do something in those directions. At the first blush, not yet having studied the White Paper, with that simplicity of mind and spirit which is known to all members of the Committee, I have not been able to grasp all the details of the statistics so ably, so lightly, almost so flippantly thrown about by the Chancellor of the Exchequer, but, on the whole, my first impression, speaking for myself, is that he made an excellent analysis of the whole world financial and economic situation, on which I congratulate him, and although his Budget may

bear a little heavily on the least favoured of our fellow citizens, I think on the whole he has tried to do the fair thing by the people of the country and on that also I may congratulate him, subject, of course, to thoughts which may come with a closer scrutiny of the implications of the speech and to the developing criticism that there may be. I cannot consider the Budget as an unhelpful one, and I congratulate the right hon. Gentleman upon it.

Sir Percy Harris: I quite understand that the Chancellor of the Exchequer after his great ordeal has not been able to remain in the Committee. I would have liked him to hear the congratulations I am going to give him, because I have on more than one occasion been a critic of the right hon. Gentleman. I have felt that in his earlier years in this high post he was a bit overwhelmed by his Chancellor's robes, but I think that the whole Committee felt to-day that he had grown into his robes and that he had risen to the occasion. I am glad that he did not treat the financial position of the country and the provision of the necessary taxes as an isolated problem, but that he dealt with the efforts of the United Nations as one whole and emphasised that the prelude to victory and the high road to success are to pool our resources. The tribute he paid to the United States of America and particularly to the President, and also to his financial advisers, was well deserved, not only for what they have done since they entered the war, but for the imagination shown by the Executive of America before they became one of the United Nations. We cannot let our friends in America know too much that we are pooling our resources. Lend-lease is no longer a one-way traffic; the whole financial resources of all the United Nations, the Dominions as well as this country, the new world as well as the old, are to be thrown into the common pool to bring about victory.
Canada has made a great gesture, and I am glad that the Chancellor made special mention of it. I do not want the impression to get abroad, however, that Australia, New Zealand and South Africa are lagging behind. Australia and New Zealand have their own problems to face. They have the enemy at their gates, and their taxpayers are just as heavily taxed as ours are. They have to deal with their


own enemy, which is a serious danger to a small population scattered over large territories. This Budget will be encouraging not only to our Allies who still have their freedom but also to our Allies who see their territories in the possession of the enemy. It will also be a message to our enemies of proof of our determination and of our power in financial and economic resources to see this war through, however long it lasts.
I am glad that the right hon. Gentleman went out of his way to refer to the cost of living. I think that history will say that one of the most remarkable achievements of this war is the way our finances have been handled by the Government so that the costs of essential foodstuffs have been kept down as compared with the last war. Then we saw constant rises and only realised towards the end the necessity of putting on the brake. In this war prices of essential foodstuffs have been kept at a reasonable rate, and this has been a tremendous help to the morale of our people and has increased the efficiency of our workers. I do not often pay compliments, for I am a born critic, but I should like to pay a compliment to the Board of Trade for extending the principle of utility clothing. That is a sensible step and means that the average lowly-paid man can bear the full brunt of the shortage of commodities by being able to get food and clothing at a reasonable price. There is another thing about which we have to be satisfied. Perhaps I am more pleased than most Members because I went through the last three years of the last war as a Member of the House, and I saw the constant rise of interest rates. The idea got abroad that if you wanted loans from Lombard Street, they were entitled to exploit the national need. The ingenuity of the Treasury has saved us from that, and the patriotism of the nation has proved that when a sound financial policy is put over the Government can rely on the good will of the whole nation to subscribe to war loans.
The right hon. Gentleman emphasised the need for even more savings on a larger scale next year. I suggest that there ought to be less humbug about War Savings Weeks in the coming 12 months. We have had these wonderful targets which have led areas to compete one against another, but in many cases a large part of the

money has been found by wealthy concerns who have happened to be in the area. I have in mind a poor borough where two wealthy breweries happen to be located, and the greater part of the subscriptions was found by them. That was not new money and was not savings in the ordinary sense of the word. The money was taken out of the companies' reserves and was not the kind of new savings we want. The appeal must be made to the ordinary men and women, who must be made to realise their great responsibility and the great opportunity which is given them to buy these various certificates. They should be made to realise, too, that their savings will not only help the country now but will help them in the post-war years when industry may be depressed and opportunities for employment not so large.
I want to say a word about the last 15 minutes of the Chancellor's speech. He spoke for over two hours, but the most important part of the statement dealing with new taxes came in the last few minutes. His proposals did not show any great originality, but I do not make any complaint about that. They are well-tried methods of raising money. I do not even criticise the Beer and Whisky Duties, though the cost of both those refreshing drinks is now becoming so high that possibly many men will have to forgo their daily drink at their favourite licensed premises, but I think the Chancellor is putting the Tobacco Duty too high. It is true that in the first few weeks after the extra duty was put on tobacco and cigarettes last year there was a falling-off in consumption, but the demand soon recovered, and increased, and the additional revenue was forthcoming, but I have reason to say that the explanation of a great deal of that increase was that the better-paid workers and the better-off classes were able to get full supplies, which they had not been able to obtain the previous year, while a great number of working people, on the poorer scale, were forced to cut down their consumption of tobacco. I am afraid that the result of the new scale of duties will not cause the war worker getting good wages, or middle-class people, to suffer, but the old age pensioners and the less well paid workers will be forced to reduce their consumption of tobacco and cigarettes. I think that is a point it is well worth my mentioning.
As for the tax on cinemas and other entertainments, nothing is more significant than the long queues standing outside cinemas and theatres in almost every important urban centre, and it does not seem unreasonable, for what is after all a luxury in the fullest sense, that those who enjoy it should pay a little contribution towards the cost of running the war.
With that one small criticism about the Tobacco Duty, which I am afraid we cannot alter, because it would throw out the right hon. Gentleman's Budget, I genuinely accept the Budget proposals as reasonable and sound. I was glad that the right hon. Gentleman promised a further investigation into the incidence of taxation on the weekly wage-earner. There has been a real demand from the weekly wage-earners that they should pay as they earn. I recognise the difficulty in devising a watertight scheme and all the difficulties affecting assessment and allowances which stand in the way of a simplified scheme which would meet the needs of the situation, but I am glad the Chancellor is investigating the problem. No weekly wage-earner minds paying when he is earning good money, but he does resent having to pay Income Tax on past earnings when his wages have come down. I have actually heard it said by men, "I am not going to work any more or work longer hours just to pay Kingsley Wood." That may be very wrong, but it is very human, and if my right hon. Friend, even though he has set up a Committee—to set up a Committee or a Commission is one way of running away from the problem—can devise any ingenious method to enable the ordinary man to pay as he earns, then instead of Income Tax being unpopular with wage-earners, it will become a generally accepted method of raising revenue. After all, it is the best method, the most honest method of raising revenue, because the taxation is not concealed. The citizen knows what he is paying. If the Chancellor can devise any method to enable the ordinary man to pay as he earns, then he will really deserve well of his fellow countrymen. I end as I began. The right hon. Gentleman will be surprised to hear now he has returned that I paid him a compliment, because he does not often hear one from me, but it is a genuine one, and I do congratulate him on his very successful Budget.

Sir Robert Tasker: I think the Chancellor will agree, as we would all agree, that it is useless to impose taxation if it cannot be paid. Let me give him an instance which has already been referred to by me, the case of a man enjoying the enormous income of £150,000 a year from property. With the Income Tax and Surtax, which remain unaltered, the Chancellor leaves that man with 6d. in the pound, which means leaving him with £3,750 a year. But that is not due until January. In the meantime the Chancellor calls for a War Damage Contribution, and as that man's income of £150,000 is derived from property, he will find that in July he has to pay £12,500 to the Chancellor of the Exchequer, so that by the end of the year he is deprived of every penny of income. It has all gone in taxation, and he owes the Treasury £8,750.

The Deputy-Chairman (Mr. Charles Williams): The hon. Member cannot go into the method of administration of the War Damage Contribution. He can only submit a simple illustration and cannot raise an argument about the whole war damage question.

Sir R. Tasker: I was only using it as an illustration to show that the man has nothing left to live upon. I will submit another illustration which will, I think, engage the sympathy not only of the Chancellor but of every hon. Member in the Committee, and that is the case of the pensioner. According to our taxation system, the man who has been thrifty and has saved, or has perhaps contributed towards a pension for himself, is told that the income from his investments or his pension has not been earned by him and is therefore subject to the tax of 10s. in the £ As a trustee, I am in the unfortunate position of having to say to two ladies, one aged 69 and the other 73, "You have been left annuities of £60 and £90 a year, but the investments are in trustee stock and 10s. in the £ must be paid, and I cannot pay you the £60 or the £90." Surely the Chancellor, who has shown some sympathy in this direction, could take some step by which repayment of the tax deducted could be accelerated. The amounts which have been deducted, £7 10s. and £11 5s. a quarter, cannot be recovered in less than a quarter of a year, and I appeal to the Chancellor to make some arrangement by


which taxation shall not be deducted at the source to meet such cases. That applies to many thousands of people as well as to those who have been in civil, military or naval service. If their pension is £150 a year, it is at once reduced to £75 a year until they are able to recover the relief. We ought not too lightly to pass this scheme of taxation without having some regard to pensioners who have done good service to the country.
Another point to which I would direct the attention of the Chancellor is the Income Tax form. I am called upon to fill up many of them, and I am usually absolutely bewildered. I do not know anyone, save the Chancellor of the Exchequer or a Treasury accountant, who can tell what the Income Tax form means, and I suggest that some simplification should be introduced into it. The people of this country are willing to pay for the war, as has been shown in the clearest manner by their ready payment of Income Tax. Nobody wants to shirk his duty, but many people are bewildered. If the Chancellor of the Exchequer were to introduce some simplification, it would be a real boon to us all. Speaking as a trustee, another point which I find extraordinarily difficult is in regard to Probate Duty in meeting the demands of the Exchequer. If there is insufficient money in the bank how is the Probate Duty to be paid? In one case there was a post-war credit, which could not be turned into money. We are told that we must wait until the end of the war. Cannot the Exchequer accept it in part payment of the Probate Duty? The matter does not affect me personally, as I am not dead yet; it affects me only as an executor. The money must be found. The Treasury, quite rightly, exacts payment of Probate Duty, and I suggest that some arrangement should be made to meet the difficulty. It is the same as with money in the Post Office Savings Bank. The Government have the money, but the Post Office cannot release it to pay the Probate Duty. Why not? Cannot a concession be made which will help executors to get and pay the money quickly, which is what the Chancellor of the Exchequer and we all want? I know how hard put too the Treasury must be to collect this money. There was an instance of a bicycle connected with a Post Office worker. An allowance of 3s. was made

in respect of this bicycle, but the Income Tax authority claimed some of it. Perhaps the Committee will allow me to read two short letters.

The Deputy-Chairman: The hon. Member's remarks are getting very near to the subject of the Post Office. If the letters have been addressed to the Postmaster-General or have anything to do with the Post Office, the hon. Member had better not read them. If they are a Treasury matter, I will allow him to read them.

Sir R. Tasker: Yes, these are a Treasury matter. I would not attempt to introduce Post Office matters. The first letter is from the Chief Inspector of Taxes, Departmental Claims Branch, the Hydro, Llandudno. Here is the Chief Inspector saying that 1s is not to be calculated, but the Finance Branch, in a letter dated 25th April, say that the question has been raised as to whether the allowance should be included in the return of official emoluments furnished to the Assessor of Income Tax.

Mr. Muff: What was the date of the letter?

Sir R. Tasker: 25th April, 1942. The assessor of the G.P.O. then ruled that a portion of the money would cover cleaning, namely, that 1s. should be included in the return of income.

The Deputy-Chairman: That is as far as I can allow the hon. Member to go. He must not pursue that subject any further.

Sir R. Tasker: It is dealing with a return for Income Tax purposes.

The Deputy-Chairman: It is associated with the G.P.O.

Sir R. Tasker: It is from the Finance Branch, and they connect up one with the other. I readily obey your Ruling, having got out the point which I wanted to bring to the notice of the Chancellor of the Exchequer. I am willing to hand all these documents over to the Chancellor of the Exchequer. I find that when one puts all the cards on the table one is treated quite reasonably by the Treasury officials. I have no complaint to make against the Income Tax assessors and have always found them very fair. I never had a confession from them that they do not understand what we do here, but they certainly do not. [Interruption.]


I agree with the Chancellor's observation that very few people do. I almost dare to suggest that the Chancellor himself does not always know. One of the most curious things during our Budget day discussions is that we cannot suggest proposals for new taxes, except very quickly, before the Chairman has detected us and rules us out of Order. Are there not many ways of raising money? [HON. MEMBERS: "Yes."] We all know that there are. Why does it take 12 months for these things to be thought out? I wonder whether the Chancellor of the Exchequer will allow me to send him a few suggestions? He can acknowledge them on the usual post card.

Sir K. Wood: Sir K. Wood indicated assent.

Sir R. Tasker: Another thing we are not allowed to discuss is how to economise, although I do not believe there is a Member of this House who could not suggest economies to save taxation. We are not allowed to do it. I am willing to write to the Chancellor also suggesting how economies can be effected, and that——

Major Vyvyan Adams: On a point of Order. Would not the hon. Member be in Order in discussing fresh means of economy?

The Deputy-Chairman: Not at this stage.

Mr. Muff: Not even shorter shirts?

Mr. Gallacher: I listened with very great interest to the speech of the Chancellor of the Exchequer, hoping that in view of the situation that has developed in this country and throughout the world he would show some of the resolution, and some of the courage, that are demanded of the lads in the Eighth Army and the other Armies in North Africa; that he would make a real frontal assault on the vested interests of this country, and take the preparatory steps for putting them out of business altogether. The Chancellor had very much to say and very much to praise in connection with the stabilisation of prices. That was a very necessary, very desirable and very valuable action on the part of the Chancellor and the Government. The Chancellor will recognise—at any rate I hope he will in view of what he had to say about stabilisation—that if private enterprise and

vested interests had been left to their own resources, we would have been in a state of ruin and collapse by this time. The Chancellor would not deny it. He could not possibly deny it. Yet the Chancellor, throughout his speech, informed us that he was preparing to let this gang of bloodsuckers loose on us as soon as the war is over. It is almost unbelievable. There is not a Member who does not recognise that their activities had to be curbed if this country was to be saved. The only thing they can think of now is how they can get the shackles off as soon as the war is over and lead us into disaster once again. I hope that the Chancellor will think over, the matter. I will say this for the Chancellor. He is rapacious in one direction——

The Deputy-Chairman: I did not ask the hon. Member to keep off the Chancellor on one line, because I took what he said to be an illustration, but I do not think he ought to go into possibilities about all the various political parties to which the Chancellor might belong. Perhaps the hon. Member will not pursue that further—[An HON. MEMBER: "He said 'rapacious' not 'Fascist' "]—I beg the hon. Member's pardon. I thought he said "Fascist."

Mr. Gallacher: No, I only want to give an indication of how far-reaching the clutching hand of the Chancellor is. He is the first Chancellor of the Exchequer who has got a penny of Income Tax out of me and out of the hon. Member for Dumbarton Burghs (Mr. Kirkwood). But I would rather he had turned his attention in other directions than on to tobacco and beer. I do not drink beer myself, but I certainly consume a considerable amount of the noxious weed, and I have recollections of the happy days of long ago, happy days that I fear will never return, when you could get an ounce of black twist and a pipe for threepence. But the Chancellor used an argument to-day that was in actual opposition to the taxation he is imposing. Of course, I have just about given up hope of expecting anything like logic or reason from the other side—[Interruption]—the hon. Member is one of the young Conservatives who stands out from the mass of deadheads—[An HON. MEMBER: "We are not buffoons"]. But the Chancellor said that there were two features in connection with taxation, one to cut down consumption


and the other to raise revenue, but that the essential thing was to cut down consumption. Every Member heard the Chancellor use that argument—that the essential thing was to cut down consumption. Then he told us that as a result of increasing the tax on beer and tobacco the consumption had gone up—[An HON. MEMBER: "And in spite of increased water, too"]. Whether water was put in or not, consumption has gone up following the increased tax.

Sir K. Wood: In spite of it.

Mr. Gallacher: The taxation did not reduce the consumption but sent it up.

Major Adams: "Post hoc, propter hoc"!

Mr. Gallacher: But the Chancellor will try to show how in other directions, the taxation has resulted in reduced compensation. Did the hon. and gallant Member say "Don't talk nonsense"?

Major Adams: No. I did not make the interruption which the hon. Member attributes to me. I said something quite different. As a matter of fact it was Latin—"post hoc, propter hoc."

Mr. Gallacher: I would expect the hon. and gallant Member to show a presumptuous and ignorant attitude towards other Members and to try to hide an interjection or interruption behind a dead language, because he is practically dead himself. But the important thing is that whether it is responsible for the increase or not, the taxation has not reduced consumption. Therefore it is futile to put on further tax in that particular direction if the essential thing is to reduce consumption and the secondary thing to raise revenue. What happens when the increased price goes on to beer? The increase in the consumption of beer is not because of the increase in wages. It is because of the intensity of labour and the lack of opportunities which those who are labouring day in and day out have for getting relaxation or travel of any kind.
I wonder whether Members on the other side have tried to think for a moment what kind of life these lads in the factories and foundries live. I would like any Members on the other side, particularly young Members like the hon. Member for Oxford (Mr. Hogg) to do about six months

in an iron foundry, day work and overtime. [An HON. MEMBER: "He would be a Communist."] He would, not half be a Communist. In times like these when it is so difficult to get relaxation, when there is very little opportunity for travelling to the country or anything of that kind, the only thing for many people is to turn to the public house and drink beer and whisky. If the Chancellor puts on a heavy tax and increases the price it is not stopping the drinking but it is reducing very considerably the amount of money that is left for maintaining the household and the other members of the household. Everyone on this side knows that. They see the working class homes; they live among them, and the heavy taxation that is going on beer and whisky is coming out of the stomachs of the women and the children in the homes. Does the Chancellor not know that? I will take the Chancellor for a tour round many working-class areas, ask him into the homes, show him what is put on to the tables, and the conditions under which the people have to live. There is no question of buying utility clothing, even without the Purchase Tax. I understand the necessity for getting money. The Chancellor says that taxation should be on the basis of capacity to pay. I have always said that—and meant it, unlike the Chancellor. I have said, over and over again, that until every penny has been taken from those who can pay it and still have sufficient left to live on, the Chancellor has no right to levy taxes, direct or indirect, on the poorer people. Does anybody say that the rich are taxed up to their capacity to pay? Certainly not. The Chancellor says, "I shall have to ask the House of Commons for permission to raise loans." The House should not give such permission. It should say, "Do not let us raise loans; take it from them." Why is it that in such a situation there is all this talk of piling up enormous debts and paying huge sums in interest?
A mother stopped me the other day in the street and told me about her only boy, who had gone out to Singapore, and had now been missing for 15 months. She asked me to get the Departments responsible to make inquiries to find out whether he was still alive. That boy was 19 when he was taken away from her. Her poor heart is wrenched and broken. Do the Minister of Labour, the Secretary of State for War and others say to women


such as that, "I will borrow your boy, and return him with interest"? Hon. Members on the other side all support Ministers in taking away these lads. Who can tell which of them is going to pay the full penalty? There is no borrowing in that case. There should be no borrowing so far as the finances of the country are concerned. Take over the banks and the whole of the finance of the country, and use them to the fullest interest of the country, to ensure not only that our armies are supported, but that the masses of our people are effectively supported and their health maintained.
At the railway station last night the hon. Member for Dumbarton Burghs and I were approached by one of the station officials, who said to us, "What are you going to do to us to-morrow?" I said, "We are going to strip the trousers off you." He said, "I will not mind a bit so long as they keep up the good work that is going on in North Africa." You will find that spirit throughout the whole of the working class. But what about the other fellows? Why do you not make them manifest the same spirit? Take away their finances, take away their industries, take everything over. We are told that sacrifices are being made by all sides. There is not a word of truth in it. When the war is over, the privileged section in this country will own the land, they will own the industries, they will be able to carry on exploitation for profit, just as if there never had been any war. There is not a principle affecting private property and private enterprise, so called, that has been affected by any of the Regulations which we have introduced. The people who were destroying the country before the war, giving us neglected and derelict areas——

The Deputy-Chairman: It would not be fair to the rest of the Committee if I allowed the hon. Gentleman to go into a long dissertation on private enterprise. Other hon. Members would then be entitled to follow him. We had better keep strictly to the Budget Resolutions.

Mr. Gallacher: I must thank you, Mr. Williams, for your guidance on the general character of the speech I am making, but I considered that, at this early stage, generalisations of the character I have been making might be more useful than getting down to a detailed discussion of the Budget such as will be carried on in

the next few days by those who consider themselves experts. I will finish by urging the Chancellor and the Government and those who are behind the Government to understand the feeling which exists in this country, the feeling which was expressed by that porter at the railway station, the feeling manifest by workers in industry and by the people throughout the Services, that they want all the resources of the country brought together, pooled and utilised, to ensure the early and victorious end of the war and the safeguarding of the health and wellbeing of the people of this country.

Mr. Holmes: I would like to add my sincere congratulations to the Chancellor, because in four Budgets he has pursued a definite policy. There is no person more annoying, either industrially, domestically, politically or financially, than the man who is always changing his mind. The Chancellor has not changed his mind since he started four Budgets ago. He has based himself on three or four principles. One was that he was going to borrow half the required amount and tax us for the other half. In the second place, notwithstanding what the hon. Member for West Fife (Mr. Gallacher) has just said, he adopted the policy of taxing the broadest back. In the next place, he made up his mind that the articles which should be particularly taxed were those of an optional character. The necessities of life were maintained at a price which rose slowly above pre-war level. The effect of that policy has been that we have had very little inflation, and we have been able to borrow money at almost half the rate of interest which we had to pay between 1914 and 1918. In fact, the comparison between what happened in the last war and what has happened in this, so far as finances are concerned, is most remarkable, and the Chancellor deserves every credit from the Committee for what he has done.
It was interesting to hear the Chancellor refer to the help we had had from America, and especially from Canada. While acknowledgment is made of that, attention ought to be drawn to the fact that the United Kingdom and Canada are the two most heavily taxed countries in the world at the present time. I cannot help feeling that the financial responsibilities which Britain has been taking for
the war effort, and which in many cases she is bearing alone, are not sufficiently widely


known and are certainly not generally appreciated, and it would be well if we advertised our qualities a little more.
My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) will doubtless be speaking on the next Sitting Day. He has recently published an autobiography, which is most interesting and enjoyable reading. One of the things that pleased me was his boyish delight when he was first elected to this House and I am sure many of us share with him that feeling and are still proud of the fact that we are Members of the House of Commons. The second thing that he told us, which was news to me, was that he was the author of the suggestion of a capital levy in 1918. I always thought that it was Mr. Sydney Arnold, now Lord Arnold, who had introduced the idea first to this House, but the right hon. Gentleman says it was he who suggested it. The Chancellor of the Exchequer by his policy has made a capital levy, with all its repercussions, quite unnecessary. In many previous Budget discussions the right hon. Gentleman the Member for East Edinburgh has always referred to that particular subject, and he says that his party desire a capital levy. But I am sure he has not referred to it in the last three years and I shall be interested to find out whether he makes any reference to it when he speaks on this Budget.
This is what has happened. The Chancellor of the Exchequer, by putting on an Excess Profits Tax of 100 per cent., an Income Tax of 10s. in the £ and then a Surtax of 9s. 6d. in the £ has reduced the profits which can be taken out of industry to comparatively little and has transferred the balance of those profits to the Exchequer. The effect of that is that many men to-day who are carrying on big businesses are spending 19/20ths of their time in working for the State and sometimes a little more. They carry on the business, look after it and then see 19/20ths, or even more, of the result of their work going to the Chancellor of the Exchequer. That is surely a great sacrifice which many men have made as their contribution to the war. It has been said by many people that Excess Profits Tax causes people to slacken and that it causes men who are running businesses to be extravagant. I do not believe either of those statements.

Mr. Muff: Did it in the last war?

Mr. Holmes: It did in the last war, I agree, but I do not believe that occurs to-day. The spirit of the men who are running businesses is such that they are proud that their businesses are contributing so much to the National Exchequer for the business of carrying on the war. There is just as much pride among people in big business, in doing their bit towards the war effort, as there is among the workers of the foundry to which the hon. Member for West Fife referred.
There is one point to which I want to refer with regard to the theory put forward lately by the hon. baronet the Member for Barnstaple (Sir R. Acland) and his new party, and that is, the desirability of getting rid of profit. That is a very big subject and I am only going to touch on the point of whether the absence of profit would affect the Chancellor of the Exchequer and the Budget which he has introduced to us to-day. At the present time he showed us in the Financial Statement that he is receiving £1,450,000,000 out of Excess Profits Tax, Income Tax and Surtax. Some £200,000,000 of the Income Tax comes from wage earners and possibly £200,000,000 more comes from sources other than industry, so it leaves at least £1,000,000,000 a year which comes from the profits of industry into the Exchequer. If you abolish all profit in industry his loss is £1,000,000,000 a year.

Mr. Foster: Where does the profit come from?

Mr. Holmes: What that would mean would be a reduction in prices. Let us look to the post-war years. I am not one who believes that we shall be able to reduce taxation very soon after the war. We shall have to give up borrowing. It would not be right to continue to borrow after the war is over, and in order to carry out all the things we want to do, to maintain adequate forces in the Army, the Navy and the Air Force, to do all the social work we want to do, all the restoration and re-equipping of the country and generally to get the men discharged from the Army back into civil life, we shall have to raise as much money as we are raising to-day from taxation. But if we gave up the profit in industry, the Chancellor of the Exchequer would be losing £1,000,000,000 a year. How is


that to be made up? It can only be made up by the other Income Tax payers of the country, and the Chancellor of the Exchequer would have to say to them, "Now as the result of there being no profit in industry, you are able to buy everything much more cheaply, and so money goes much further. Therefore, you must be taxed to replace the income that I previously received from the profit on industry." The effect of that would be that the wage-earner who was earning a decent wage would find himself called upon to pay 14s., 15s., or 16s. in the £ and I wonder how that would commend itself to the miner, to the railway worker, or to the engineer or to other people?

Mr. Collindridge: Where does the present profit come from?

Mr. Holmes: The conversations that have been going on between trades unions and the workers, and between workers' and employers' organisations and the Government with regard to conditions in industry, wages boards and everything else should be continued, and we should endeavour, more and more, as far as industry is concerned, to pull together and share equally the responsibility and the proceeds.
The last thing I want to say is with regard to voluntary savings, which have been a conspicuous success. Some Members of this House have criticised the Savings Movement and the Noble Lord who presides over it, but the results speak for themselves. A wonderful effort has been crowned with success. I wonder whether Members realise that while we have at the present time two important Reports—one by a Noble Lord with regard to post-war currency and the other the famous Report on social security by Sir William Beveridge—both these persons have previously given us reports which have been rejected by the people of this country. Sir William Beveridge produced a scheme for the compulsory rationing of fuel, and the Noble Lord introduced a scheme of compulsory saving. But neither of these compulsory schemes has been implemented, because the people of the country preferred to do the job themselves. I am sure that in every house in the country there was pride last winter at the fact that the number of pence and shillings per week put into meters for electricity

and gas was less than the previous year. Householders did their bit. In the same way the National Savings Movement was a wonderfully successful effort. It was said that compulsory fuel rationing would require 60,000 civil servants to administer it, and it would have taken 60,000 more for the compulsory savings scheme——

Mr. George Griffiths: It is interesting and instructive to hear all this. Could the hon. Member tell us who gave him his figures, because they are all bunkum?

Mr. Holmes: I have not looked them up, but that is what we were told at the time.

Mr. Griffiths: The Government did not make any such statement.

The Deputy-Chairman: I do not see that the figures have anything to do with this Budget at present.

Mr. Holmes: I am sorry; I was only trying to point out how the people of this country had saved a great deal of man-power which the Ministry of Labour could use in other directions. The last point I want to put to the Chancellor is this: Can he tell us whether we have reached a maximum of expenditure? We must have reached the maximum of our man and woman-power and our capacity to fill factories and so on, and it would be interesting to know whether the sum of £15,000,000 which he mentioned to-day as being the daily cost of the war is regarded as the maximum or, if not, whether he can give a forecast of what the maximum will be. Once again, I would like to congratulate the Chancellor on his Budget. I feel it will have a good reception from this country and a good Press.

Mr. Sexton: To-day the Chancellor has once again opened his Budget, but I do not think he opened it to see what was in it but rather to see what he could put in. Before the Chancellor can come to any decisions at all he must have knowledge of the amount required to provide for the national needs, and he gets that from the various Departments who have had their Estimates before the House, so that to a large extent this House is responsible for the amount of money required by the year's Budget.


He also requires knowledge of where the money is, and I think the Chancellor has good informants on that point in the Commissioners of Inland Revenue and other sources. Thirdly, he has the hardest task of all. Knowing what he wants and knowing where it is, the Chancellor has to place the burden equitably on the shoulders of those who are best able to bear it—not a very enviable task. The Chancellor, to do that as it ought to be done, must possess sound judgment, plenty of tact and, above all, honesty of purpose to see that fair play all round is given to the taxpayers of the country.
I was sorry I was not able to hear the whole of the Chancellor's speech, but as a feat of endurance it was marvellous. The Chancellor is quite definitely going into ways and means of facing this tremendous problem. War-time taxation is an extra function; peace-time taxation is to provide the revenue to carry on the services of the country. In war-time any additions to those taxes are to prevent over-spending. I am not quite sure whether the people of this country have yet realised the danger of over-spending. I am not talking about old age pensioners, people who are on compensation or who have national health insurance as their only source of income. I am talking about people in other ranks who are working and who, in many cases, are getting good wages. There is great danger in over-spending, and some of the taxes the Chancellor has put on in previous Budgets have been with the aim of preventing this over-spending. The Purchase Tax was placed on principally for that reason, and it has proved to be the Chancellor's insecticide to slay the squander bug. But when we come to Budget Day we are all inclined to look at the gloomy side, at what we shall have to pay. We scan the list of taxes the Chancellor puts on and grumble if any of our own cherished luxuries have been hit hard. We forget to look at the other side. I was interested in what the Chancellor said about a national balance-sheet which he is considering preparing, so that we can set alongside our liabilities some of the marvellous assets of this country.
For a short time I would like to look at the assets side. These assets have accrued to us through the Budgeting of years gone by. Had it not been for the

great war we are now engaged in, these assets would have been of infinitely more value. We cannot lay large assets on one side during a conflict which is so expensive. Many of the assets are intangible. They cannot be weighed, and we cannot measure them, but yet they are there solid and substantial and stand us in good stead in the eyes of the country and of the world.
The major portion of the present Budget deals with war services. I remember speaking on one Budget when I had taken the trouble to calculate the weight of silver it would take to pay the taxes and how many trucks would be needed to hold the silver. This time I have worked out these fantastic figures, these astronomical figures, these incomprehensible figures to the ordinary man, in a different way. What we lend to the Government, somewhere about £2,000,000,000, if it were paid in pound notes and those pound notes were made into girdles, would provide six girdles that would go right round the world. Some may say, "What a picture!" Yet it is not so fantastic. If we look East, West, North and South over the five continents, over the seven seas, to the heavens above and the earth beneath and the waters under the earth, we shall find the products accruing from that penditure I have just mentioned. The are there in the weapons that our boys are using in all quarters of the globe. So it is not so fantastic if I refer to that expenditure in the terms of girdles round the earth. When we realise what we are fighting for, we shall know that it is to provide a better girdle. In the long run we are fighting for liberty, and the price of liberty is not only eternal vigilance. In this instance it is the price of victory. We intend to have it, and we intend to stabilise it. We are paying heavily now in Income Tax, but the vast majority of the people are prepared to go on tightening their belts, paying more, lending more, so that a saner world will ensue. Like the country mouse in the old story, the people of the country are saying,
Give me again my hollow tree,
A crust of bread and liberty.
That is what we are aiming at, and the vast majority of us are prepared to go on paying in order to win this great conflict, so that in the end we may have a more respectable world.
Among other things, we are fighting against ignorance. Look at our schools.


By and large, they are not as good as they should be, but we hope that as the result of the Education Bill that is to be introduced they will be vastly better, that there will be more of them and that when the great debt of war has gone——

The Chairman: I am sorry to interrupt the hon. Member, but he is dealing with expenditure now.

Mr. Sexton: I am looking at this as part of the Budget. Part of the money will be spent on education. In times gone by some people said we did not get value for the money spent on education, but if you look at Dunkirk and look at Libya and see what has been done by the lads, and by the lasses too, who have come from our elementary schools, I think we have got value for the money we have spent on education. Another asset we have is deliverance from the squalor of the slums and deliverance from the ravages of disease resulting from our health services. We hope that in time we shall have better facilities for treating disease and removing slums. Another benefit we get from the Budget is in what we pay for old age pensions.

The Chairman: The hon. Member must obey my Ruling. He is not entitled to deal with expenditure. He must content himself with dealing with the Chancellor's proposals for taxation.

Mr. Sexton: I am sorry if I have infringed the Chairman's Ruling. I thought I was entitled to speak of assets alongside liabilities in the Budget. We have assets as well as liabilities, and I thought I was entitled to remark on them, but I will not pursue the point. I will finish by saying that the time has now come to impress on our people the importance of not over-spending. We have in the past paid our taxes on the whole gladly, cheerfully and magnificently, and we are ready as far as this great war is concerned to go on paying until we reach final triumph and this country and the other nations will dictate—not like the dictators of the Axis—the terms of an honourable peace.

Major Vyvyan Adams: I am glad to be able to speak now, because I should like to prove to the hon. Member for West Fife (Mr. Gallacher) who is no longer in his place, that I am neither dead nor moribund. I imagine that to-day we are planning not only for

the immediate present but for a remoter future as well. That is why we refer to a Committee of Ways and Means. I want to do what the hon. Member for Barnard Castle (Mr. Sexton) did just now and look at the more cheerful side by specifying our vast resources. But before I go further I wish to comment with great respect upon to-day's achievement by my right hon. Friend the Chancellor of the Exchequer. I want to congratulate him on a great feat of physical endurance. He sustained his task with skill and fortitude. I shall not in the least object if he now sustains himself with a little whisky at the old price. The earlier part of his speech was characterised by something unusual, original and illuminating. He succeeded in dissipating the less happy impression that he caused during a certain famous Debate when he shook the moneybags somewhat loudly over the problem of social reform. On that occasion he produced a widespread mood of frustration and disappointment.
I am not going to deal in detail with the Beveridge Report, but I think the Government ought to devote a great deal of their attention to the problem of social security and give it, if not the first, the second priority. It cannot of course come above Defence in the present of the immediate future. It is the Treasury which will in this matter have the last word, and therefore we should have a greater chance of enlarging the measure of social security if we had a distinct Minister to whom it might be said "Here is your staff, and there is a sum of money—say £86,000,000—earmarked for your purpose." I am not asserting that the resources of the Exchequer or of the nation at large are unlimited, but before very long the moment will come when what the right hon. Gentleman referred to as the inflow and outflow of supplies will no longer be ceaseless as it is to-day. It will no longer be necessary for us to sing with devout prodigality, "Praise the Lord and pass the ammunition."
Looking at this figure of £2,900,000,000, which I wrote down at his dictation to-day on this Blue Paper, I should like the Committee to consider the height to which we have raised revenue to meet expenditure on destruction during the present century, that is, during the lifetime of most of us. The South African War, if one looks at old Hansards of the early twentieth century, was regarded as the cause of unemployment


and as an excuse for certain financial stringencies. A dozen years later, in 1914, an infinitely more destructive conflict began and lasted for four years. We then spent our treasure at the rate of £5,000,000 to £7,500,000 a day—upon destruction. Unemployment during that period was liquidated, and poverty was forgotten. After that first German war we were told far more clamantly than before that unemployment was the inevitable consequence, and the State was so impoverished that all manner of desirable expansions and beneficent reforms were "too expensive." So we grubbed along with a miserable rate of old age pension, wide unemployment, a low rate of unemployment benefit and—the means test. Yet now we have reached a new level of expenditure representing double the former amount.
In 1939 the State again fell into peril. To-day, by an unprecedented adjustment of burdens, we find ourselves able to sustain, as my right hon. Friend the Chancellor remarked, burdens twice or thrice as large as they were during the first German war. At the same time, there is to-day no unemployment, no hunger, little poverty and no destitution. Instead there are vast total savings and a huge unsatisfied demand which, unless we maintain our controls very carefully after the war, will produce a most disastrous rise in prices and temporary boom. After the last war the boom, which, as it were, blocked the gap which had been blown by the explosions in France, lasted little more than a year, if as long. After this war the demand can be extended for at least a period of 10 years, provided the supply is properly regulated. With this recent history to guide us, I want to make this point, and I am sure that it is relevant to this or any other Budget. I hope that the public will steadfastly shut their ears to any shibboleths that we cannot afford on social security a fraction of what we have expended on warlike destruction over the last 40 years. I believe that the people, in order to face this wider distribution of the national wealth, will accept a higher level of taxation. My hon. Friends on this side of the Committee must also, as I am sure they will, steadfastly and honestly face taxation which touches a generally lower level of incomes and wages.
I hope that you, Major Milner, will not rule me out of Order, because you have a close and neighbourly interest in what I am going to say. I have for nearly 12 years represented a populous district, with which you are familiar, and in parts of which the spectre of poverty is never far distant from some homes. My experience is shared by many hon. Members who entered this House, some of them somewhat unexpectedly, for the first time in 1931. With the greatest respect, I would say to hon. Members who represent suburban and county constituencies that they cannot begin to understand our problem. It is the problem of the redistribution of the national wealth, the redistribution of national resources, the bringing to those who have not, initially the right a full chance and a wider measure of opportunity. We do, it is true, now see children entering the world with chances of survival, health and success far greater than they were 20, 40 or 50 years ago; and yet—I wish to make this point, particularly when we consider that we are not always going to spend a great proportion of £5,000,000,000 a year on destructive purposes—the chances which some children enjoy are a great deal less promising than the corporate efforts of this House and the nation might make them. I am weary of spending much of my time in my constituency in trying to explain what is inexplicable; and in exhausting the patience of my self and my hearers in explaining the inevitability of distress and poverty. After these two wars I am not going to believe that such conditions are inevitable, and I want to be able to invite the attention of my electors to other matters than the "need for poverty."
A broader opportunity is something we shall owe to the men and women of the next generation. The present generation, through a higher level of taxation and
greater expenditure on social services, have proved to be not unworthy to succeed the men who fought with Wellington and sailed with Nelson. I believe the children of the heroes of Alamein, the Atlantic and the Mareth Line deserve still higher levels of security and opportunity. I entreat the Government to be ready, in their preparation for converting warlike expenditure to a peace-time economy, to be ready for a sudden end of this war. Nobody will confidently predict the exact date, but however pressing the problems


of strategy may be, we must not procrastinate at this stage of the war over the problems of public welfare. We may not garner our victory in Europe for many months to come. But I think we can depend upon it that, when the German collapse once begins, its surge and its speed will outstrip the avalanche. If we say we have no time now for consideration of the social problems which will follow the war—no time to consider how to allot the vast, almost inconceivable, national resources represented in the figures on this Blue Paper—if we turn aside from that problem, we shall be already smothering the chances of peace at birth.
To-day, with a Coalition Government, is, I am sure, the right moment to do the work. Later on our energy, and indeed our money, the commodity that it costs
so much to raise, may well be wasted by political auctioneering on both sides. I should like to see this Government set up a Ministry charged exclusively with devising the method of setting in motion the recommendations of the various Reports which were mentioned just now. This is not a moment to balance the refinements of argument. To quote my right hon. Friend the Chancellor of the Exchequer in another context, "precise reckoning is beside the mark." To-day, in perhaps the penultimate stages of the European phase of this war, when I think that anyhow we are certainly well advanced in the second half of the war, it seems to me we have the challenge and the opportunity for which we have hoped and fought. We should be prepared to grasp the moment before the opportunity passes out of our hands for ever.

Mr. Tinker: I think that if the hon. Member for West Fife (Mr. Gal-lacher) were here, he would agree with me that the speech of the hon. and gallant Member for West Leeds (Major Adams) is one with which most of us could agree. I think the hon. Member for West Fife misunderstood him when he made an interjection. His speech was on very sound lines. I wish to compliment the Chancellor of the Exchequer upon the very lucid way in which he presented his Budget to-day. I remarked to a friend that the way his voice carried all through the speech was wonderful. I do not think there is another Member who could have done it as well.
There are one or two points which I wish to put forward in the hope of getting an explanation. The new Income Tax forms have just been issued; mine came on Friday last, a prelude to the Budget statement. There are instructions on how to fill up the form and a reference to "full earnings, including bonus, overtime, commission, casual fees, etc." There has been in the coal industry in Lancashire a curtailment of directors and management. Some of them have ceased to be employed for various reasons. A man in that position is given certain emoluments, say £5,000, on ceasing to be employed, and what is troubling us is how that sum is taxed. If it had been paid to him in wages, we know it would have been taxed, but as it is being paid as a sort of gratuity at the end of the man's employment, one wonders what is the position as regards tax, whether it is a way of evading the tax. I did expect the Chancellor of the Exchequer to deal with that point. Before the end of this Debate I want the Chancellor or the Financial Secretary to explain the position to us. Do these people evade taxation? How is taxation levied upon them?
The next point is a general one which is troubling most of us, with regard to disparity of wealth. The Chancellor of the Exchequer said that taxation ought to be paid by the people best able to do so, yet we find strange things going on. We protest about it, times without number, without having any influence upon the Chancellor. I follow the newspapers from time to time to find out what is happening to the wealth of the country. On 8th April this year I cut from "The Times" and "Evening News," of London, two lists of fortunes. We are being told about the need of equality in meeting the burdens of taxation; how is it that people can leave fortunes like this at the time of their death—£51,000, £88,000, £54,000, £25,000, £22,000, £66,000, £25,000, £22,000, £40,000 and £24,000? In the "Evening News" they use a nice term in describing these fortunes, "Other people's money." I always wonder whether that means that the money belonged to other people or really to the people concerned. The fortunes in this case were: £116,000, £65,000, £30,000, £19,000, £18,000 and £14,000. When a person of that kind dies, the State gets his money. Would it not be far better to have equality during life, so that the


common burden would be shared by everyone?
A question was asked of the Chancellor of the Exchequer some time ago about the estates possessed by different proportions of the population. The reply showed that, according to the latest figures in 1941, there were 63,000 people with estates up to £500, 45,000 people with estates up to £1,000, 44,000 up to £5,000, 9,000 up to £10,000, 5,000 up to £20,000, 3,000 up to £50,000, 838 up to £100,000, 360 up to £250,000 and 99 people with over £250,000. One wonders when this kind of thing will close. An hon. Member who spoke for the Independent Liberal Party——

Mr. Muff: No, the Simonites.

Mr. Tinker: I just forget his constituency, but he deplored that the taking of this money provided so much less in the Chancellor's pocket and that, consequently, the burden fell more heavily upon the individual taxpayer. But surely he would recognise that before that time comes those people would be getting the benefit by the lessened cost in production and all that kind of thing, and be much better able to pay, whereas now we find that these people are able to make enough to pay the Chancellor and leave these huge fortunes. I think it is about time this question was tackled more decisively by the House of Commons. Let me make a comparison—this is my main point. I was expecting to hear from the Chancellor of the Exchequer about something being done in connection with what was said in the King's Speech, in which it was stated:
Renewed consideration will be given to the position of Old Age and Widowed Pensioners, and farther measures will be laid before you.
I did expect that if there was any meaning in this phrase the Chancellor to-day would have been able to tell us what was being put aside for this purpose. There has been no mention of it. One has to ask what is behind all this kind of thing. Are we to be told that fortunes can be made, as they are being made, and yet at the same time a vast number of our people, millions of them, are to suffer on the verge of poverty? Yet there has been no mention at all in the speech of the Chancellor to-day as to what will be done for them. I was expecting some attempt to meet that position, because we on this

side put certain propositions before the Chancellor and the Government in the hope that something would be done. I have made my protest on that. I do not intend to pursue it further, but it is one which should be made, because it is causing great feeling in the country, and unless something is done, this burden will be causing much more unrest than is the case at the present time.
With regard to the taxation imposed today, one may say to oneself, "Yes, well, those who enjoy luxuries like beer ought to pay a little more, and those who enjoy tobacco should pay a little more." But I question whether it is wise to do it as it has been done to-day. Take the question of beer. We represent the miners, and it is one of the things they look forward to when they finish the day's work—a pint of beer, or maybe two pints. We are calling on the miners to give all they can, to give increased output. Yet the little joy they get from their pint of beer is to be taxed a little more. What will the miner say? He will say, "We are putting in all the labour we can, and this little luxury helps us in our work. Is that any response to what we have been doing for the country?" I say it will have a very ill effect on the minds of the community and of those who work very hard and do enjoy a glass of beer.
On the question of tobacco. I do not smoke at all. It is no virtue in my case, because I do not enjoy smoking tobacco. But there are those around me who do, and it seems to me to be putting something on their shoulders with which I cannot exactly agree. Then I would refer to another section of the community, the old age pensioners. It is one of the solaces of life to them. I know what happened the last time taxation was increased—the protest that went forth. Now, further taxation is being imposed. Is it wise at this juncture, when we can prove that there are these reservoirs of wealth that can be taken care of by the Chancellor rather than going to those sections of the community about whom I have been speaking? With regard to cinemas, I rather agree with the Chancellor. I think a little more can be paid. I am not protesting against that at all.
On the borrowing question, the Chancellor of the, Exchequer made great play to-day about the rates of interest. I wonder whether it is sound financial policy to pay even the present rates of interest.


I feel sure the country would respond to a proposal that people should give up their money without any interest, if it was done equally all round. The payment of interest will mean a further burden on us all when the war is over. It will also mean paying back money in much greater volume to those who have most. When we are prepared to put everything we have into the common pool, there should be no question of paying interest upon it. I go to these demonstrations and appeal to the people to give what money they can. I know that if they have anything at all, they will give it. My chief purpose in going to these demonstrations is to see that the people are keeping up their spirits. If we did not get a penny from them, no gun would fire a shot less. The only real object of these War Savings demonstrations is to see that the spirit of the people is still with us. It is; the people are whole-hearted in the prosecution of the war, and we can get all the money we want without paying any interest. If the Chancellor feels that he must pay some interest, I think that the rate should be reduced and that it should not be more than 1 per cent., or 2 per cent. at the very most. I hope that the Chancellor will examine the position in regard to the taxes on tobacco and beer. If he had kept them out of his Budget Statement, I think it would have been well received by all sections. Later on, when we come to discuss the Finance Bill, some protest should be made against these two forms of taxation, though whether we should vote or not on the question I do not yet know.

Dr. Russell Thomas: I have listened to the speech of the hon. Member for Leigh (Mr. Tinker) with con- siderable interest, especially when he talked about the vast fortunes that are being left to-day. I do not think he quite grasps the position. If I left a fortune—which I am not likely to do—of £100,000 to-morrow, it would make no difference at all to the war effort. First, I should have had to pay 10s. in the £ on the income I received from that fortune during my lifetime, and, of course, surtax, and the £100,000 must have been invested either in war industry or bonds or put into a bank. The whole of the £100,000 would be working for the war effort. I think my hon. Friend, perhaps, objects to my having £100,000 for some other

reason, an ethical or political reason, which I shall not go into now, but whether I own the £100,000 or the State owns it does not matter at present.

Mr. Tinker: I was trying to show that at a time like this it is very hard upon people, when they are making great sacrifices, to see huge fortunes being left.

Dr. Thomas: That is what I thought. The hon. Member does not object to the £100,000 being left in my possession because of any effect on the war effort, but he protests against the principle.

Mr. Mathers: Is it not a question of liquid assets which could not be harnessed to the war effort in the way suggested?

Dr. Thomas: I do not agree with my hon. Friend. Even at my death I have to pay heavy Death Duties, and such as is left must of necessity be invested again. If it remains in the bank, it could hardly do better.

Mr. Mathers: I think there is a misunderstanding. I am saying that it is not necessarily a question of cash assets. It may not be possible with such as land to harness it to the war effort to any considerable extent at all.

Dr. Thomas: If it is land, it can be harnessed to the war effort and be used to the full capacity. The matter of who is the owner and who is not is a moot point, and I do not think it necessary to pursue the matter any further now. My hon. Friend also talked about the interest that is payable. He advocated that there should be no such thing as war loan and the people should lend their money interest free. We must remember that the interest payable on war loan will all be redistributed in the country. People are taxed in order to pay the loans at the end of the war, and it goes into the pockets of others. It might, of course, mean that some people might sit back and enjoy the labours of others at the end of the war. I remember two years ago when I made a dissertation in this House—in fact, it was the first time I had ever spoken in this House—on the problems that the Chancellor of the Exchequer would have to face in his Budget, saying that he was faced with balancing his Budget either by inflation, borrowing or taxation. Hon. Members might not remember


that I favoured on the whole taxation. I proceeded to point out that the Chancellor's main object was to remove as much of our purchasing power as possible—and he has taken it away, bit by bit, to his everlasting credit—but that he should leave us with, perhaps tea and tobacco, in order that we could maintain our morale. But my hopes are sinking to-day.
I will now quote, if I may, some of the figures in the Budget in order to make a point or two that I have in my mind. The total national expenditure was £5,637,000,000, and that included £225,000,000, the Canadian contribution which we are now spending in Canada in a sort of Lend-Lease arrangement. The total revenue was £2,820,000,000 and the total borrowing £2,817,500,000. The borrowing and revenue were almost equal. The main use of these figures, in our budgetary condition, in the present state of our country, and the present state of the war, is to compare them with figures of other war Budgets. I do not think that they would convey very much, unless one looked at them in this way. The right hon. Gentleman the Member for Wakefield (Mr. Greenwood) was a little over-stating the case, I think, when he talked about figures being merely symbols. If we do what I suggest, one or two interesting points come out. The first is that if we compare war revenue with expenditure, we find that, in the first full year of the war, in 1940–41, revenue to expenditure was 37 per cent. In 1941–42 revenue to expenditure rose to 43½ per cent. and in 1942–43, that is to say, the year that has just closed, it has risen to 50 per cent., or, taking out the Canadian contribution, to 48 per cent. It is very remarkable that we can raise such an enormous sum from the revenue before resorting to borrowing. We must, of course, take into account Lend-Lease figures. This would make the revenue percentage very much more unfavourable, although, of course, as the Chancellor has so well stated, reverse Lend-Lease should be taken into account.
Another point I would like to bring out in comparison is this. We see a steady increase of war expenditure, and it is well brought out in this way. If we regard the 1940–41 expenditure as 100, then in 1941–42 expenditure rose to 123 and from

1942–43 it rose to 145, or, taking out the Canadian payment, to 140. There you see a steady rise of war expenditure as the war has progressed, and I would like to say a word or two on this later. Other points of interest that come out in the Budget are that revenue has exceeded expenditure by £192,000,000, but that expenditure was less than the revised estimate by £500,000,000 and that Income Tax reached £1,000,000,000 for the first time in history. The National Debt on 31st March, 1942, was £13,000,000,000, which included the Debt of this war, the Debt which was standing over from the last war and, in fact, all our debts except external debts. But it is not so much the amount of the Debt that matters as the interest we have to pay on it. That is the thing that is so important. By the time the Chancellor opened his Budget to-day the National Debt had risen to £15,600,000,000. Last year's interest on the Debt was £310,000,000 per annum. Although the Debt is very much higher than it was at the end of the last war, the interest payable is very much less. Indeed, it was considerably less than it was in the two or three years following the last war. Actually the interest payable was less and is less at the present time. The average rate of interest at the beginning of this war on the National Debt was about 3½ per cent. or higher; at the present time the rate of interest is only just over 2 per cent., which is a very different thing.
Suppose we look at things from an adverse point of view for the sake of argument, and say that the war will last another three years, in order to see how much more money we should then have to borrow. Supposing the Chancellor borrowed another £10,000,000,000, that would make the total National Debt £25,000,000,000, and the interest payable on that at present rates would be £500,000,000 per annum. That is equal to about 5s. in the £ Income Tax. Even that colossal sum still compares favourably with the amount of interest we paid at the end of the last war, because interest rates then, as I have said, were very much heavier. We must remember, however, that interest rates have been kept low for several reasons. There are £2,000,000,000 invested in Savings Certificates and Defence Bonds, which can be cashed at short notice. Another £4,000,000,000 are invested in


Treasury Bills, Treasury deposit receipts—and the floating debt—with interest of only one per cent., or sometimes a little less. Then another £5,000,000,000 are invested in National War Bonds, redeemable within seven or eight years. Interest is low because borrowing is short. The point I want to make clear is that if interest rates go up, as they may well do at the end of the war through circumstances over which we have no control, by only one half per cent., that would mean, roughly speaking, another 2s. 6d. on the Income Tax. Let us bear these things in mind with other matters.

Mr. G. Griffiths: May I ask the hon. Member whether he suggests that the people of this country would be so disloyal as to desire another half per cent.?

Dr. Thomas: I am afraid the hon. Member has not followed my argument. I admit it may seem rather abstruse, although actually it is quite simple. If interest rates went up by half per cent., although I hope they will not, the effect would be very considerable. Such a rise might occur from events outside in the world over which this country would have no control whatever.
Now I would like to turn to Customs and Excise. The Chancellor showed that Customs brought in £21,000,000 more than the estimate and Excise Duties about £59,000,000 more than the estimate. That suggests several things. It suggests, first of all, that the country is consuming more dutiable goods than was anticipated or is desired. Secondly, there is the incontrovertible fact that there has been a shift in the distribution of the national income from the higher to the lower grades. That is as clear as daylight. Wealthy people are gradually being taxed to the limit, and others of moderate wealth and income, because they have not had the advantage of increased income, find it very difficult to meet their liabilities. It is also clear that those whose earnings have risen are carrying surplus money which they are spending but which they ought to invest. This proposition that I have put forward is confirmed by the increase in the note circulation. It has increased during the last year from £754,000,000 to £927,000,000, and there is every prospect of its increasing to £1,000,000,000 during the Easter holidays, when the note expansion generally increases still further.

Mr. Murray: The hon. Member must know that if you increase your factories and employ more people, you must inevitably increase the circulation of money.

Dr. Thomas: The note circulation at the beginning of the war was £500,000,000. It is now nearly £1,000,000,000, and although the cost of living has not increased much during the last year and there was no unemployment, during that last year, owing to wage increases, the note circulation has increased by about £127,000,000. I am trying to point out the tremendous danger of that rapid rise in the note circulation, which must eventually lead inevitably, if it continues, to inflationary conditions. It is clear that sufficient earnings are not returning to the Treasury. Savings campaigns are swallowed up constantly in increased wages. I am not against high wages. Nevertheless, there comes a time when you must say to yourself, "We must not ask for more." The railway increases under the 1941 Agreement fall on the Exchequer and not on the railway companies. Take the increase of the amalgamated engineers.

The Deputy-Chairman (Mr. Charles Williams): I do not think we can go into the Railway Agreement or trade agreements. They are administrative and have nothing to do with the Budget.

Dr. Thomas: I only mention them in so far as they affect the increased note circulation. The increases that occur at present must of necessity fall upon the Exchequer, and therefore make the danger of inflation still worse. My hon. Friend the Member for Harwich (Mr. Holmes) asked when the maximum expenditure was going to be reached. I do not think it is possible to expend a great deal more. We are utilising all our materials at present. There is no unemployment. Everything is being used for the war effort, more or less. We cannot increase expenditure any further unless there are further demands for wages. That is the only way the Chancellor can be forced to put on further taxes. The whole of the people of England are occupied, and the rest of the stuff we are getting from America and Canada. There cannot be any increase of expenditure, if people are reasonable in their demands.
I should like to turn now to a completely different point. We have heard


appeals for consideration for this and that section of the community. I am going to appeal for a certain section of the community who have had a particularly raw deal. I did so last year, but I do not see that any relief has been given to them in the Budget proposals. I refer to the small rentier, the person who is living on his or her investments. She has perhaps £200 a year; she is getting on in years, and is faced with a rising cost of living. The personal allowance has been reduced from £100 to £80, and that is a serious thing. I hope the Chancellor will be able to do something for such people, because they are a class whose sons and husbands have frequently done much for the ruling of this great Empire. They have suffered in the hot and arid plains of India and in the jungles of Africa, and carried British law and justice to the far corners of the earth. Separated from their homes and their families, they have not had the advantage of gaining the fortunes and prizes which sometimes come to those at home, and it is not good to think that they might now have to eat the bread of charity. The Budget is a method devised for sharing the burdens among ourselves as equitably as possible, so that we can march shoulder to shoulder towards victory, but I would ask the Chancellor to remember this section of the community who have done so much for their country and who have no organisation to represent them or plead for them in this House.

Mr. Collindridge: I am sure the hon. Gentleman will forgive me if I do not follow him in all his points. Some of them I did not really understand, but that may be due to the fact that I have been engaged in the industry of mining, where low finance rather than high finance is the lot of the workers. The hon. Gentleman, I thought, was a little unhappy in his defence of his colleague the hon. Member for Harwich (Mr. Holmes).

Dr. Thomas: I did not defend him. I merely took up the question that he asked, when we should reach the maximum expenditure. I pointed out that we were using all our resources, and provided wages were stabilised, we should have reached the maximum expenditure now.

Mr. Collindridge: I apologise. I ought not to have drawn the hon. Member into another statement. If I understood him

aright, he was defending the suggestion of the hon. Member for Harwich that the Chancellor should be more considerate to the people who pay Excess Profits Tax and Surtax.

Dr. Thomas: I must make it clear; I said nothing of the kind.

Mr. Collindridge: I do not feel inclined to give way again. I understood the point of the hon. Member for Harwich to be that we should have greater consideration for the payers of Excess Profits Tax and Surtax. During the speech of the hon. Member, I tried to get in a point as to where profits come from and to ask whether, if we eliminated profits, the nation would be disadvantaged. We might be precluded from having sources of revenue for Excess Profits Tax. They are, however, two sources of profit. One is where the producer of an article leaves more in the industry than he receives in wages, and the other is when the commodity is sold to the public and the public pays more for it than the economic cost. In war-time we call upon people to give their very lives in the service of the nation, and in the case of a single soldier who dies, if there are no real dependants no compensation goes to the next-of-kin. Surely it is not too much to ask of the people who hitherto have been advantaged in this island home of ours that they should, at least, have merely the status quo in the shape of profit while the war is running. Because of that, I thought that perhaps the two saddest speeches to-day were those emanating from my hon. Friends who sit on the Liberal-National Benches.
I want to congratulate the Chancellor of the Exchequer upon the very able statement he gave to the Committee. To listen to him was advantageous to us, and the fact that the right hon. Gentleman also sat for hours afterwards listening to the various points which my hon. Friends raised spoke volumes, I thought, for his interest. We may not agree with all that was in his speech, but I think that it will be well received in the country as a whole. He has faced up to the situation in which the nation is placed. I would also give a word of congratulation and encouragement to my hon. Friend the Member for Leigh (Mr. Tinker). When I came to Parliament a few years ago, it used to be the custom, the courtesy custom, to


adjourn immediately after the Chancellor had made his statement. My hon. Friends on the Treasury Bench appear to approve of that custom, but I am sure they will bear with me. I think it was a good thing that the hon. Member for Leigh blazed the trail for back benchers to make better use of the short time they have to put their points of view before the "big guns" give their considered statements on succeeding days. Some people may say that our speeches are ill-considered, but to speak immediately after the Budget, if not from the head at least from the heart, can be an advantage to ourselves and the people we are privileged to represent.
I want to put in a word for the people who are to be more heavily taxed to-day. I have never smoked in my life—some people may say "Shame," or "More's the pity" and I drink very little, but we ought to understand why some people drink as much as they do. I come from the mining industry and when working in the pit with my colleagues I was accustomed to drink some four pints of water during a shift. In that way it was possible to create a thirst tendency and a drinking capacity much greater than that of people in some other occupations. When my right hon. Friend spoke about one-fifth more drink being consumed, I wondered whether he has taken into consideration the fact of the gravity of beer being lower, and of people having to drink more before they get to "a certain stage" as one explanation of his increased revenue from beer. While I would say, "Hands off taxing the people's bread"—and the other commodities which they require in order to live—and prefer that we should rather have taxation on luxury or non-necessitous articles, say beer against bread, we must have regard to the fact that there are industries in which the drinking of a humble pint or so of beer is an encouraging factor, not merely physically but also psychologically.
I wonder whether people who, like myself, drink very little and smoke nothing at all, ought not to reflect whether we are not laying on other people a burden of taxation which is rather difficult for them. Let us face the fact that we allow the consumption of tobacco and beer. If we feel that they should not be consumed, if, as my right hon. Friend inferred, taxation was imposed not merely to raise revenue but to prevent the consumption

of the materials, surely we ought to take the straightforward and manly course of precluding people from consuming these commodities and not tax them. As has already been said, there may be a large amount of discontent about this matter in our industrial centres.
I wish to pay tribute to the right hon. Gentleman for removing one difficulty which we have voiced a number of times. We have tried to get the Treasury to see the wisdom of continuing Income Tax rebates to those humble folk who have the misfortune to have members of their families physically or mentally afflicted and unable to work. I congratulate the Treasury on extending a friendly hand to those people who have suffered for so long. I wish also to put in a plea for a class of people about whom I am very concerned—our women war workers—in regard to their travelling expenses. About a year ago, the right hon. Gentleman permitted war workers who had had to leave their ordinary work and place of residence to do war work elsewhere, the sum of £10 as rebate for travelling costs, but I have been alarmed to discover that women war workers are not allowed this advantage, on the ground that they were not formerly in industry. I assure the right hon. Gentleman that the full blast of this realisation will cause great indignation and discouragement to our wonderful women, about whom Her Majesty the Queen spoke so nobly yesterday, and I ask him and his Department to look into this aspect of the matter. The right hon. Gentleman spoke of collecting Income Tax at the time of the receipt of the income, and that is all to the good. I have had quite a number of complaints in my Division from workers whose wages have changed, but who have been called upon at a low wage period to pay Income Tax upon the higher wages they formerly received. We are mindful, of course, of the old statement that "eaten bread is soon forgot," and I ask the right hon. Gentleman to see whether something can be done in this matter.
With regard to widows who receive lump sums of compensation in respect of fatal injuries to their men folk, and who often have tax inflicted on the weekly or monthly amounts they receive by way of such compensation, I would suggest that, inasmuch as those sums of money paid for fatal accidents are exhaustive and not


continuing, we might remit taxation, at least, on those lump sum payments. I heartily approve of the right hon. Gentleman's statement that direct taxation is on the increase as against indirect taxation. It may be argued against me that the fact that workers paying direct Income Tax and doing so with some distaste is against the view I put forward, but I believe that when we have settled to this idea that we must find the national revenue, it is infinitely preferable that we should do it viâ the salaries and incomes we receive, rather than by way of an indirect form, which often hits the individual who is bringing children into the world in support of the State.
I would add a word of praise to the Department for continuing this exemption of the Forces from the increased tax on tobacco. I think that was all to the good. Those gallant men of ours at home and abroad are well entitled to receive this advantage and I would even suggest that we should extend our good feeling to our Forces to the extent of making their pay tax-free as well. I would conclude with this point: My hon. Friend on the Liberal benches suggested more generous consideration of the people paying Excess Profits Tax. Could I request him to consider this aspect of things? In industry to-day there is a feeling that, despite what our hon. Friends have said from those benches, about new and sympathetic consideration, the fact is that although these large amounts have been paid in Excess Profits Tax, there is still a very high standard of living among those people. Indeed I would like to suggest to my right hon. Friend's consideration a closer examination of the costs that some firms are now putting in, other than materials and wages, and for an examination of costs of entertainment, etc., and various things that are subsidiary to directors' fees, etc. Thereby I think we shall have advantages accruing to the Exchequer.
All things considered, I think the right hon. Gentleman has made a good statement and that it is something which the country will approve. I do think that some justice has been shown to-day to some of the poorest sections of our community and that I am sure will be of great advantage to them. I hope that some of the other points which my hon.

Friends and I have raised, will have the Department's consideration.

Mr. Muff: We have made one or two innovations in recent years. One is that the lesser breeds, the minnows of finance, have a chance on the first day of the Budget Debates to take part, leaving the remaining two or three days to the financial pundits. Our time to-day has not been wasted. We have had several interesting speeches. The junior Member for Southampton (Dr. Thomas) characterised his own speech as abstruse. It certainly was. He attacked my hon. Friend the Member for Leigh (Mr. Tinker) for decrying, as I understood, the possession by individuals of huge sums of money; and then he proceeded to criticise my hon. Friend the Member for Wakefield (Mr. Greenwood) for talking of symbols. Yet to-day's finance, with its mighty astronomical figures, makes one think in terms of symbols. Before the hon. Member for Southampton came into the House, when the war broke out, a prophecy was made that by the time the war was finished we should owe £20,000,000,000. France was then at our side, but I do not think the prophecy will be proved wrong.
The hon. Member, in truly Liberal National style, congratulated himself that the rate was only 3 per cent., when the rate was previously 5½ Per cent., and sometimes, when a municipal authority wanted to borrow, 6 per cent. Some of them are still paying 6 per cent. on money which they borrowed in the last war. I would remind the hon. Member that it was Members on these benches who demanded that the maximum should be 3 per cent. It was my hon. Friend the Member for Leigh himself who introduced an Amendment limiting the rate of interest on short-term loans, and the House agreed with him that the interest should not exceed 2 per cent. I believe the Treasury is now borrowing at 1.7/8ths per cent., or something like that. We are borrowing at lower rates, thanks—I am going to be self-righteous—to the watch-dogs on this side of the House. The right hon. Member for South-West Bethnal Green (Sir P. Harris) spoke of the attitude of Lombard Street when this House wanted money. Even to-day the Chancellor could not announce the changes in taxation until after a certain hour for fear that the patriots of Lombard Street would exploit the situation.
The hon. Member for Southampton mentioned the danger of inflation. It is a great danger, and we have to guard against it. We have to remind our constituents that the prices of some of our main commodities are kept stable because of the money that we are spending to avoid inflation. This is a service that the House is rendering to the nation, and I do not think the nation sufficiently realises what we have done to keep the cost of living at its present figure. It might be very much higher if it were not for our agreeing to what we disliked before the war, namely, subsidies. I will confide in you, Mr. Williams, that I have lost the price of a cigar in a wager. I made a wager that no Chancellor of the Exchequer would dare to put up the price of tobacco another 4½d. He has done so. The price of a bottle of decent beer now, I believe, will be 1s. 1d., or something like it. I am not going to repine. I shall have to cut smoking down, but there is no doubt that the Chancellor of the Exchequer is exploiting the weaknesses of the nation, especially with regard to smoking, and he knows that he will get his revenue. He is going to get increased revenue from tobacco, our drinking habits and our love of pleasure.
People will die, and Death Duties will have to be paid, but I like to think of the "good old days" when the Chancellor of the Exchequer would have gone to that Box and boasted that he had a surplus of a few million pounds. If I am not mistaken, the figures now are something approaching £192,000,000. It has gone into the financial kitty. The increased revenue coming in is all going to be swallowed up in the financial kitty, whereas—and this is where I do criticise the Chancellor of the Exchequer—every other Chancellor, especially in peace-time—I agree it is more difficult in war-time—would have suggested that besides giving the reliefs, which we welcome, to housekeepers, dependants, disabled and so on, he was prepared to discuss the raising of the basic rate of pensions to the aged poor. Throughout the speech I did not hear one syllable about that from the Chancellor of the Exchequer.

The Deputy-Chairman: I must remind the hon. Gentleman——

Mr. Muff: I have left it.

The Deputy-Chairman: —that the Chancellor of the Exchequer would have been out of Order.

Mr. Muff: Would he? I am surprised to hear that, though I do not contest your Ruling, Mr. Williams.

Mr. Tinker: Are we to assume that, if the Chancellor of the Exchequer had made provision to increase old age pensions, he would have been out of Order?

The Deputy-Chairman: He could have conveyed an illustration of it, but I do not think he could have gone into it at any great length. I remember that last year there was some controversy on this subject, and it was ruled out of Order.

Mr. Muff: The lesser lights on finance have been holding forth at not too great length. There was a right hon. Gentleman—the late Joseph Chamberlain—who, when the Government of the day were proposing something, said, "We are not going to take this lying down." I want to say in all seriousness—and this is where I leave it—that we expect something more from the increment of taxation under this Budget and that a dividend should be paid to those who are suffering from that low basic rate to which I have previously referred. I agree with regard to everything else. We have been handing out bouquets to the Chancellor, but I would also hand out a bouquet to the "pick-and-shovel" man. I always call the Financial Secretary to the Treasury the "pick-and-shovel" man. I believe he has also been likened to the devil. But the hon. Gentleman has put in a considerable amount of work, and we thank him for it, and we thank the Chancellor of the Exchequer, but these benches, which are not overcrowded at the present time——

Mr. Kirkwood: But they are better than those benches over there, where they are Government supporters.

Mr. Muff: These benches, when they are full, will be full of Oliver Twists, and asking for more.

Mr. David Adams: I, too, desire to tender my cordial congratulations to the Chancellor for the astounding Budget he has submitted to us to-day. It is the most phenomenal Budget we have yet seen, providing, as it does, for an expenditure


of £15,000,000 a day. I think we must justly affirm that the deductions the Chancellor has drawn from the operation of his previous Budgets have been strictly impartial and that, however much we may dissent from the taxes which have been added or remitted, we can, nevertheless, all assert that there is nothing in the Budget which favours one section of the community more than another. I sympathise fully with, and declare myself an adherent of, the view expressed by my hon. Friend the Member for Leigh (Mr. Tinker), that if it is desirable to conscript life, it may be equally desirable to conscript wealth. That seems to be an incontrovertible proposition, but I recognise that we are living in a capitalist country and that we have a capitalist Chancellor of the Exchequer. If the Chancellor recognises, as he undoubtedly does, that if we are to strip industry for the taxation of the wealth of the country, it will mean to a certain extent stripping industry of its resources through which it must operate in the interest of the country, then, indeed, he may be dubious of the results in the post-war period, when we must increase our export trade and have no mass unemployment.
The Chancellor has undoubtedly pursued a safe and equitable course in regard to his stabilisation policy. One felt that he might have dabbled a little in the ceasing of expenditure of very large sums that are being paid daily, weekly and annually in order to stabilise the currency of the country and to maintain the cost-of-living index at its present level. We learn that the sum of money required to do so is no less than £180,000,000. With regard to remissions of taxation, we must rejoice that at last—although, in my judgment, too late—utility clothing and its products, and housekeepers' and dependent relatives' allowances have been dealt with. These remissions ought to have been done long ago. For the section of the community that was suffering as a result of the Purchase Tax the remission is extremely welcome, especially in those quarters where relative impoverishment still prevails.
I am glad the Chancellor stated that he has hopes of evolving a scheme by which weekly deductions for Income Tax will be made during the period in which the money is earned. There have been many bitter complaints on the part of

men who are suffering and have suffered—who have brought the suffering upon themselves indeed—because of demands for Income Tax upon earnings at a previous period when their fortunes were on a much better level than they were when the tax had to be paid. If a scheme of that character can be evolved, and it does not seem to me to be a difficult matter, there will be removed what has been in industrial circles, to my positive knowledge, a source of great grievance. Men have felt, unreasonably in my judgment, a grievance, and they have unreasonably asserted that grievance by declining to work on night shifts or at week-ends.
With regard to new taxation I dissent entirely from the increased taxes upon entertainments, upon tobacco and upon beer. These will strike at things which have become not mere entertainment and pleasure, but, owing to the pressure upon labour, a necessary solace. The workers have been deprived of normal opportunities of recreation, and they regard their entertainments, their beer and their tobacco as necessities. I think it is a great mistake to add to that taxation. I was glad that the Chancellor mentioned that there were to be certain remissions in Excess Profits Tax. I take it they apply to taxes already paid and not to new taxation. Certain things, such as repairs and renewals, allowances for obsolete machinery, the fall in value of stock, and other wasting assets seem to me to call for certain remissions of taxation as a common-sense anticipation of needs which will require examination after the war.
It occurred to me to wonder whether the Chancellor was not thinking that this might be the last war Budget. I do not believe it can be, but the day is dawning when we shall see the last war Budget, and the Government ought to be more alert in anticipating post-war problems. The Atlantic Charter promises full employment for all, and the Prime Minister has told us that we must strive to secure our fair share of an augmented world trade. If we are to have greater freedom of trade and greater planning in industry, it is time that we anticipated the urgent needs that will present themselves as far as the export and import trade of this country is concerned. The time has come, in my judgment, when the Treasury ought to be able to anticipate the amount of expenditure, so that public


investment may co-operate if we are to secure the full employment that we seek. If we have entered, as I believe we have, into this new era of universal planning, we must apply this to trade and finance so that the nation may maintain an adequate level of capital outlay for industry and trade. The Treasury ought to provide statistical tables to enable the nation to forecast the position as far as trade, industry, employment and cognate matters are concerned for at least 6 to 12 months to come. That is not an impossibility. It is achievable in Russia, and it ought to be achievable here. I believe the Chancellor, broadly speaking, has gone upon very safe, sound and just lines, and we hope that in the Finance Bill he may see his way to eliminate altogether, or at all events to modify substantially, the new

taxation upon the sections of the community that I have enumerated.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again" [Mr. Boulton], put, and agreed to.

Resolutions to be reported upon the next Sitting Day. Committee also report Progress; to sit again upon the next Sitting day.

The remaining Orders were read, and postponed.

It being after the hour appointed for the Adjournment of the House, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.